The
conference
is
now
being
recorded.
Ladies
and
gentlemen,
thank
you
for
standing
by.
Welcome
to
the
Covestro
earnings
call
on
the
first
quarter
and
full
year
2021
results.
The
company
is
represented
by
Markus
Steilemann,
CEO,
Thomas
Toepfer,
CFO,
and
Ronald Köhler,
Investor
Relations.
During
the
presentation,
all
participants
will
be
in
a
listen-only
mode.
The
presentation
will
be
followed
by
a
question
and
answer
session.
[Operator Instructions]
I
would
now
like
to
turn
the
conference
over
to
Ronald
Köhler.
Please
go
ahead,
sir.
R
Ronald Köhler
Head-Investor Relations, Covestro AG
Yeah.
Good
afternoon
to
all
European
participations
and
good
morning
to
all
Americans.
I'm
happy
that
you're
joining
our
full-year
2021
conference
call,
and
I
know
it's
a
busy
day
and
it
might
be
one
of
the
several
conference
calls
you
have,
therefore,
I'm
even
more
happy
that
you're
here.
We
have
posted
the
Annual
Report
and
the
earnings
call
presentation
at
our
IR
website,
and
if
you
haven't
seen
it,
you
can
always
download
it.
And
there
you
will
also
find
our
Safe
Harbor
statement
and I
assume
you
have
read
it.
And
with
that,
I'll
turn
it
over
to
Markus.
M
Markus Steilemann
Thanks
a
lot,
Ron
and
very
good
afternoon
and/or
good
morning
to
everybody
on
the
call.
In
the
full-year
2021,
our
earnings
performance
was
well
above
previous
year
levels,
as
the
2020
results,
as
you're
well
aware,
were
heavily
impacted
by
the
coronavirus
pandemic.
The
demand
rebound
resulted
in
a
10%
core
volume
growth
in
last
year,
and
earnings
remained
on
high
levels
throughout
the
entire
year
2021.
We
delivered
€3.1
billion
EBITDA
and
a
free
operating
cash
flow
of
€1.4
billion,
and
I
think
that
qualifies
2021
as
a
strong
financial
year
for
Covestro.
We
want
our
shareholders
to
participate
in
our
financial
success
and
therefore
yesterday
we
announced
a
new
share
buyback
program
of
€500
million
over
the
next
two
years.
We
also
continue
our
ambition
to
pay
out
an
attractive
dividend
and
propose
a
dividend
of
€3.40
per
share.
How
do
our
2021
results
compare
to
our
past
promises?
Let's
turn
to
the
next
page.
We
achieved
all
our
financial
targets
set
for
the
year
2021.
As
I
said,
core
volume
growth
of
10%
included
the
volumes
from
the
acquired
RFM
business
and
came
in
at
the
lower
end
of
the
guided
range.
We
also
saw
strong
demand
and
also
limited
product
availability
accompanied
us
in
our
customers
throughout
– and
our
customers
throughout
the
year.
Free
operating
cash
flow
of
exactly
€1.429
billion
came
in
at
the
lower
end
of
the
latest
guided
range,
yet
above
the
upper
end
of
the
initial
range.
While
earnings
and
cash
flow
outlook
improved
in due
course
of
the
year,
cash
was
increasingly
absorbed
by
working
capital,
reflecting
the
outstanding
price
inflation,
especially
during
the
second
half.
We
generated
€3.85
billion
of
EBITDA
and
19.5%
return
on
capital
employed,
well
above
our
initial
guidance
and
close
to
the
center
of
the
latest
guidance
corridors.
While
delivering
on
target
on
the
financial
side,
I'm
excited
to
announce
today
new
targets
on
the
non-financial
climate-related
side.
Covestro
has
a
tradition
and
a
track
record
of
pioneering
sustainability
in
the
polymer
industry.
I'm
convinced,
shareholders
of
Covestro
will
also
in
future
benefit
from
both
leadership
in
sustainability
and
profitable
growth.
Let's
take
a
look
at
our
new
targets
in
more
detail.
Covestro
aims
for
climate
neutrality
and
has
set
for
itself
a
bold
and
ambitious
target.
Net
zero
for
Scope
1
and
Scope
2
greenhouse
gas
emissions
by
2035.
This
target
is
another
major
milestone
toward
our
corporate
vision
of
becoming
fully
circular.
As
a
key
milestone,
we
plan
to
cut
greenhouse
gas
emissions
from
our
own
production,
referred
to
as
Scope
1,
and
from
external
energy
sources
referred
to
as
Scope
2,
by
60%
by
2030.
A
key
aspect
for
our
2035
reduction
target
is
meeting
the
goal
of
the
Paris
Climate
Agreement,
under
which
the
world
community
aims
to
limit
global
warming
to
1.5
degrees
Celsius.
Sustainability,
and
more
specifically,
climate-related
targets
are
not
new
to
Covestro.
As
a
matter
of
fact,
in
2021
we
achieved
our
previous
specific
greenhouse
gas
emission
reduction
target
for
2025
ahead
of
time.
We
more
than
halved
specific
emissions,
again,
Scope
1
and Scope
2
compared
to
the
base
year
2005,
while
production
volume
doubled.
As
a
consequence,
Covestro
achieved
climate-neutral
growth
since
2005.
Reducing
our own
emissions,
however,
will
not
be
the
end.
We
plan
to
further
reduce
indirect
greenhouse
gas
emissions
from
upstream
and
downstream
processes
in
the
value
chain
referred
to
as
[indiscernible]
(00:06:06).
This
part
of
the
transformation
will
be
largely
linked
to
our
transition
to
a
circular
economy.
More
importantly,
we
strongly
believe
that
transition
opportunities
will
outweigh
transition
costs.
We
aim
to
shift
all
our
production
processes
and
products
completely
to
circular
principles
in
the
long-term
and
we
intend
to
support
meeting
our
and
customers'
climate
objectives
at
the
same
time. Covestro
is
continuously
expanding
its
portfolio
of
climate-neutral
products
as
customers
already
today
demand
sustainable
products
and,
we
believe,
are
also
willing
to
pay
for
the
added
value.
This
is
vital
to
align
our
transition
to
net
zero
emissions
with
profitable
growth
prospects.
To
achieve
net
zero
emissions,
Covestro
anticipates
dedicated
investments
of
accumulated
€250
million
to
€600
million
by
2030.
These
investments
will
tackle
our
direct
greenhouse
gas
emissions,
but
also
increase
our
overall
energy
efficiency.
This
is
expected
to
result
in
low
operating
expenses
of
between
€50
million
and
€100 million
annually
during
the
same
time.
We
currently
also
expect
an
increase
in
operating
expenses
in
the
magnitude
of
a
low
three-digit
million
euro
amount
annually.
These
cost
assumptions,
based
on
historic
circumstance
that
prices
for
fossil-derived
energies
are
lower
than
prices
for
renewable
energies.
The
upside
here
is
that
this
historic
price
order
is
being
turned
around,
as
it
can
be
observed
in
many
places
today.
If
we
now
turn
to
the
next
page,
we
have
identified
three
main
levers
that
make
a
vital
contribution
to
achieving
our
climate
targets:
more
sustainable
manufacturing,
renewable
electricity,
and
renewable
steam.
The
waterfall
graph
on
the
chart
shows
our
detailed
path
and
expected
contribution
of
each
of
the
measures
to
reach
our
interim
target
of
60%,
emission
reductions
in
2030
and
a
100%
reduction
in
2035.
It
is
needless
to
say
that
business
growth
without
any
climate-related
measures
leads
to
higher
emissions,
in
our
case,
plus
1
million
metric
tons
until
2030.
Thereafter,
we
expect
no
negative
impact
on
emissions
from
business
growth
as
future
growth
investments
are
required
to
support
climate
neutral
growth
from
2030
onwards.
Also,
there are
external
factors
that
influence
our
Scope
1
and
Scope
2
emissions.
These
factors
comprise
the
energy
mix
of
[indiscernible]
(00:08:58),
for
example,
the
announced
nuclear
exit in
Germany
and
Belgium,
as
well
as
public
energy
allocation
schemes,
for
example,
determined
by
the
German
renewable
energy's
law,
short,
EEG.
The
net
effect
of
all
changes
as
known
today
amounts
to
minus
0.7
million
metric
tons.
To
look
at
the
identified
lighthouse
projects
from
the
area
of
manufacturing
excellence
and
renewable
energy,
let's
turn
to
the
next
page,
number
7.
We
have identified
numerous
measures
to
effectively
reduce
our
greenhouse
gas
emissions.
In
the
area
of
more
sustainable
manufacturing,
production
processes
will
be
further
improved
and
energy-efficiency
enhanced.
One
focus
is
to
reduce
nitrous
oxide
emissions
by
installing
highly
efficient
catalysts.
Secondly,
in
the
area
of renewable
electricity,
our
production
sites
worldwide
will
be
gradually
converted
from
fossil
based
to
renewable
electricity.
We
have
already
entered
a
number
of
power
purchase
agreements
for
renewable
energy
and
further
agreements
are
being
planned.
Thirdly,
steam. This
is
an
important
energy
source
for
chemical
production
processes.
Converting
steam
generation
from
fossil
to
renewable
energy
sources
is
a
challenge
that
Covestro
intends
to
solve
by
various
routes.
Those
routes
are
ranging
from
electrifying
steam
generation
based
on
renewable
energies
to
using
bio
gas
or
green
hydrogen
as
an
energy
source
for
steam
generation.
In
a
nutshell,
we
are
very
excited
to
have
set
ourselves
this
bold
emission
targets
and
have
worked
relentlessly
out
our
roadmap
towards
climate
neutrality.
Covestro
continues
as
a
pioneer
towards
a
circular
economy
and
to
successfully
deliver
both
leadership
in
sustainability
and
profitable
growth.
With
this,
I
would
like
to
hand
over
to
Thomas
for
the
financial
review.
T
Thomas Toepfer
Yes,
thank
you,
Markus
and
also
a
very
warm
welcome
from
my
side
to
our
call.
So,
if
you
go
to
page
8
of
the
presentation,
you
can
see
our
core
volume
growth
of
10%
in
the
financial
year
2021
and
that
reflects
the
volume
rebound
and
the
consolidation
of
RFM.
Just
to
remind
you,
RFM
contributed
6
percentage
points,
but
I
would
also
like
to
remind
you
that
at
the
same
time,
we
were
constrained
by
product
availability,
and
you
can
see
the
volume
development
by
our
key
industries
in
the
box
on
the
right
hand
side
in
the
order
of
kilotons
sold.
So,
first
of
all,
wood and
furniture
came
in
at
minus
4%.
We
saw
solid
demand,
however,
we
were
constrained
in
terms
of
TDI
and
polyol
availability.
Construction,
we
came –
came
in
at
plus
1%
against
solid
demand,
however,
constrained
and
MVI
and
P –
polycarbonate
availability.
And
number
three,
the
auto
and
transportation
industry,
plus
10%,
so,
very
strong
year-on-year
growth
globally
and
I
would
like
to
remind
you
that
the
global
auto
industry
grew
by
only
2%
year-on-year.
So
we
outgrew
the
industry
by
8
percentage
points.
And
that,
for
me,
is
another
indication
that
we
are
delivering
in
the
high
growth
part
of
that
industry,
specifically
electric
vehicles.
Last
but
not
least,
electro
came
in
at
plus
9%
with
growth
in
all
regions.
And
I
would
like
to
remind
you
that
all
industries
are
excluding
RFM
and
the
RFM
business
is
fully
consolidated
in
diverse
and
this
is
why
you
find
the
plus
33%
in
the
box
on
the
right-hand
side
of
the
page.
So
with
that,
let's
turn
to
page
9
of
the
presentation,
where
you
have
the
sales
bridge.
You
can
see
full-year
sales
increased
by
48.5%
pushed
by
35%
higher
prices,
that
is
the
€3.7
billion
that
you
see
in
the
bridge.
And
it's
just
another
proof
point
that
Covestro
successfully
passed
through
the
unprecedented
inflation
of
raw
material
prices
to
our
customers.
The
net
volume
effect
in
sales
and
that
excludes
RFM
was
6.5%
year-on-year,
mainly
driven
by
solutions
and
specialties,
as
this
segment
compared
itself
to
a
relatively
weak
prior
year.
And
the
volume
growth,
especially
in Performance
Materials
was
limited
by
constrained
product
availability
as
I
mentioned
earlier.
FX
is
only
a
small
negative
number
with
minus
0.8%,
mainly
driven
by
the
weak
US
dollar.
And
I
would
like
to
draw
your
attention
to
the
portfolio
bucket,
which
is
the
€863
million
that
isn't
essentially
the
entire
sales
of
RFM,
which
have
been
consolidated
as
of
April
1.
And
that's
an
8.1%
and
8.1%
effect
for
the
full
year,
if
you
put
it
to
the
Covestro
numbers.
So
with
that,
let
us
turn
to
the
EBITDA
bridge
on
page
10.
You
can
see
that
the
full-year
EBITDA
doubled
compared
to
prior
year,
driven
by
the
highly
positive
pricing
delta.
And
that
is
the
1.866
billion,
and
the
vast
majority
of
that
was
contributed by
all
key
product
groups
within
Performance
Materials.
However,
also
the
volume
effect
in
EBITDA
contributed
positively
with
an
attractive
volume
leverage
of
49%
and
FX
was
virtually
neutral
on
a
year-on-year
basis.
So
I
would
just
like
to
comment
on
the
other
items
bucket,
which
includes
essentially
three
main effects.
First
of
all,
there
is
a
negative
€443
million
in
there,
and
that
is
the
impact
from
the
higher
bonus
provisions
for
variable
compensation.
Secondly,
there's
a
negative
€60
million
one-time
effect,
which
is
related
to
the
acquired
RFM
business,
and
that
compares
to
a
negative
€33
million
in
2020.
And
number
three,
there's
a
negative
€39
million
one-time
effect
included
in
that
bucket,
which
is
related
to
the
LEAP
transformation
program,
and
we
had
no
such
effect
in
2020.
So
with
that,
let
us
go
to
page
11,
which
shows
you
the
free
operating
cash
flow,
and
as
Markus
said
earlier,
we
generated
a
free
operating
cash
flow
of
€1.4
billion,
which
is
a
strong
number,
well
above
previous
year,
and
we
achieved
this
despite
the
significant
higher
working
capital.
You
can
see
in
the
bullet
on
the
right-hand
side
that
in
Q4,
the
free
operating
cash
flow
was
somewhat
below
previous
year
as
the
positive
contributions
from working
capital
and
the
higher
earnings
were
eaten
up
by
significantly
higher
income
taxes
paid
and
also
higher
CapEx.
And
talking
about
working
capital
that
ratio
in
terms
of
working
capital
to
sales
ratio
stood
at
18.6%,
so
it's
just
slightly
above
the
18.2%,
which
we
had
a
year
earlier.
And
again,
that
reflects
higher
feedstock and
also
product
prices,
which
push
up
the
euro
values,
especially
of
our
inventories.
You
can
also
see
in
the
table
below
the
graph
that
we
spent
€764
million
on
CapEx,
so
slightly
below
the
budget
number
of
€800
million.
That
is
due
to
two
effects;
one
is
some
projects
were
shifted
into
2022,
but
also
some
projects
came
in
at
a
lower
spend
than
we
had
expected,
so
that
is
a
positive
news
in
terms
of
CapEx.
And
you
can
also
see
that
year-on-year
we
spend
a
much
higher
number
on
income
tax
paid,
but
that
reflects
our
cash
tax
rate
of
25%,
absolutely
within
the
guidance
range
and
also
below
the
P&L
tax
rate
of
25.9%.
My
last
comment
is
the
last
item
in
the
little
table:
the
other
effects.
That,
of
course,
reflects
the
higher
provisions
for
variable
compensation
because
the
cash
out
for
the
bonus
will
only
occur
in
the
second
quarter
of
2022.
So
with
that,
let
us
turn
to
the
balance
sheet
on
page
12.
I
can
truly
make
the
statement
that
our
balance
sheet
remains
strong.
Our
pension
provisions
decreased
by
€924
million.
That
is
due
partly
to
the
higher
discount
rate
specifically
in
Germany.
But
the
other
reason
is
that
we
transferred
€500
million
of
funds
in
one
of
our
pension
trusts
and
the
effect
you
can
see
it's
essentially
shown
twice
in
the
bridge,
one
time
on
the
financial
debt
side
and
the
other
time
on
the
pension
provision
reduction
side.
In
terms
of
the
balance
sheet
ratios,
you
can
see
that
the
ratios
are
strong,
so
the
ratio
of total
net
debt
to
EBITDA
stands
at
0.8
times
at
the
year
end
of
2021
versus
1.7
times
the
year
before.
And
essentially,
you
can
also
see
that
after
€1.5
billion
cash
outflow
for
RFM
and
the
€0.5
billion
euro
bond
repayment
and
also
the
€0.5
billion
fund
transfer,
we
still
have
€1.1
billion
available in
cash,
cash
equivalents
and
also
current
financial
assets.
So
with
that,
I
would
like
to
hand
it
back
to
Markus
for
the
segment
review.
M
Markus Steilemann
Yeah.
Thanks
a
lot,
Thomas.
And
please
allow
me
to
begin
with
the
full-year
review
of
our
Performance
Materials
segment.
The
segment
delivered
a
highly
positive
pricing
data
in
2021.
We
were
able
to
pass
through
increasingly
higher
feedstock
as
well
as
energy
prices,
and
on
top,
expanded
our
margin.
First
and
foremost,
this
performance
was
based
on
solid
underlying
demand.
However,
simultaneously,
our
growth
potential
was
limited
by
a
continued
constrained
product
availability.
Looking
forward
into
full-year
2022,
we
expect
our
sales
volumes
to
grow
strongly
based
on
improving
product
availability.
At
the
same
time,
we
expect
the
segment
EBITDA
to
significantly
decrease
year-on-year
due
to
intensified
competition,
mainly in
polycarbonates,
and
I
will
talk
a
bit
more
about
polycarbonates
in
a
short
moment.
Positively,
we
anticipate
that
the
supply/demand
balance
for
our
product
groups,
MDI
and
TDI
will
further
improve
as
announced
supply
additions
are
below
expected
demand growth.
Let's
turn
to
the
next
page.
So
turning
to
Solutions
&
Specialties,
we
defended
absolute
EBITDA
and
managed
earnings
to
remain
virtually
unchanged
year-on-year
despite
unprecedented
inflation.
Positively,
the
segment
recorded
strong
sales
volume
growth of
12%
year-on-year,
reflecting
a
rebound
in
demand
from
a
pandemic-impacted
prior
year.
The
acquired
RFM
business,
consolidated
since
April
2,
2021,
also
contributed
positively.
EBITDA
margin,
however,
was
down
year-on-year
by
nearly
5
percentage
points.
This
is
due
to
mainly
three
reasons:
significantly,
higher
price-driven
sales
comparing
to
unchanged
absolute
EBITDA
resulting
in
a
mathematically
lower
margin;
earnings
significantly
burdened
by
higher
[indiscernible]
(00:20:16)
prices
and
longer-term
sales
contracts,
yet
prevented
to
fully
pass
through
prices,
reflecting
the
typical
nature
of
a
specialty
business.
Looking
forward
into
2022,
we
expect
sales
volumes
to
continue
strong
growth
versus
2021,
and
we
also
expect
segment
EBITDA
to
significantly
increase
year-on-year.
How
we
anticipate
to
reach
our
segment
margin
target
of
17%
is
what
I
will
present
to
you
on
the
next
page.
As
just presented,
the
unsatisfactory
2021
margin
of
9.9%
as
a
reference
point
to
target
a
segment
EBITDA
margin
of
17%
in
2024.
In
order
to
reach
17%,
our
EBITDA
margin
will
be
driven
by
the
four
key
elements
that
are
shown
in
light
orange
on
the
chart.
Firstly,
continued
execution
of
our
lead
transformation
and
cost
containment
program,
as
well
as
continued
strong
growth
are
expected
to
further
dilute
fixed
costs.
Secondly,
we
are
going
to
further
progress
with
the
RFM
integration
and
realize
the
anticipated
synergies.
Thirdly,
we
will
focus
on
value-based
pricing,
especially
for
newly
launched
innovative
products. Lastly,
the
margin target is
based
on
mid-cycle
intersection
charges
by
Performance
Materials,
therefore,
are
anticipated
to
be
lower
than
in
2021.
In
2022,
as
already
mentioned,
we
expect
a
significant
increase
in
EBITDA.
On
the
following
two
charts,
I'm
going
to
share
some
further
details
on
our
targeted
path
of
margin
improvement,
beginning
with
RFM.
So
let's
turn
to
the
next
page.
Regarding
the
integration
of
the
acquired
RFM
business's
all
planned
synergies
are
fully
confirmed
and
realization
is
ahead
of
plan.
As
a
recap,
at
the
time
of
acquisition,
we
identified
a
total
EBITDA
contribution
from
synergies
of
€120
million,
or
about
12%
of
RFM
full-year
sales,
thereof,
€80
million
synergies
from
lower
costs
and
€40
million
from
additional
revenues.
We
could
pull
forward
the
realization
of
[ph]
these (00:22:33)
and
delivered
€26
million
in
2021,
compared
to
originally
expected
€10
million
in
the
same
year.
We
achieved
this
above-plan
realization
at
€6
million
lower
cost
compared
to
earlier
planning,
and
we
now
expect
total
implementation
cost
of
€150 million, €40
million
less
than
we
originally
expected.
The
main
reason
this
lower-than-expected
severance
needs.
In
a
nutshell,
the
integration
of
the
acquired
RFM
business
about
one-and-half
years
after
the
announcement
is
a
success
and
we
are
satisfied
with
the
delivered
results.
Let's
now
turn
pages
to
polycarbonate.
As
a
second
deep
dive,
let
me
elaborate
a
little
bit
more
on
our
polycarbonate
strategy.
Overall,
we
continue
the
strategic
portfolio
shift
from
standard
polycarbonate
to
different
polycarbonates.
I
myself
accelerated
this
shift
from
2013
onwards
when
I
headed
the
former
business unit
polycarbonates.
The
graph
on
the
left
side
shows
the
development
of
the
volume
split,
while
the
grey
bars
continuously
shrink,
depicting
the
standard
polycarbonate
business
within
our
Performance
Materials
segment,
the
light
pink
bars
continuously
rise,
depicting
a
differentiated
polycarbonate
business.
Refining
standard
polycarbonate
resins
produced
at
our
fully
integrated
large-scale
[indiscernible]
(00:24:00)
plants
within
Performance
Materials
into
differentiated
grades.
That
is
the
job
of
the
business
entity
engineering
plastics within the
Solutions
&
Specialties
segment.
In
order
to
allow
this
shift,
we
are
continuously
investing
in
downstream
capacity
referred
to
as
polycarbonate
compounding
between
2020
and
2025.
We
will
add
230,000
tonnes
of
additional
compounding
capacity.
Importantly
to
note
is
this
addition
is
neutral
to
the
overall
industry
supply-demand
balance
yet
it
exclusively
allows
Covestro
to
cater
even
more
for
the
attractive,
differentiated
customer
segments
of
this
industry.
This
portfolio
shift
is
supported
by
the
expected
7%
industry
demand
CAGR
for
engineering
plastics
across
several
customer
industries.
A
detailed
list
of
growth
drivers
is
shown
on
the
right
side
of
this
chart.
With
that,
allow
me
to
turn
to
the
next
page.
Looking
at
into
2022,
we
export
expect
solid
demand
recovery
to
continue
globally.
This
applies
to
the
products
we
just
talked
about
in
more
detail,
but
also
to
our
entire
product
portfolio.
The
figures
on
this
chart
show
full-year
demand
estimates
for
our
key
industries
and
respective
important
industries.
The
expected
2022
demand
growth
in
global
automotive
and
global
construction
shows
growth
estimates
above
the
full
year
2021
values.
The
recovery
in
those
industries
is
expected
to
continue
after
the
strong
demand
hit
by
the
coronavirus
pandemic
in
2020.
The
expected
2022
demand
growth
in
global
furniture
and
global
electro
in
contrast
show
values
below
full
year
to
2021
but
on
continued
attractive
levels.
Key
reason
is
the
strong
demand
recoveries
seen
in
these
industries
already
in
last
year.
Now,
I
would
like
to
hand
over
to
Thomas.
T
Thomas Toepfer
Yes,
thank
you.
And
I'm
on
page
19
of
the
presentation
where
we
talk
about
our
fixed
cost
development.
So,
remember
last
year, we
committed
to
keep
our
fixed
costs
unchanged
until
2023
relative
to
the
2020
level.
And
it's
fair
to
say
that
we
qualified
this
target
as
being
challenging
from
the
beginning.
Now,
if
you
look
at
the
chart,
you
can
see
that
in
financial
year
2021,
the
cost
development
was
in
line
with
the
expectation
and
our
guidance.
So,
we
saw
a
rebound
from
the
2020,
which,
at
the
time,
was
marked
by
the
lockdown
and
short-term
cost
savings.
And
the
rebound
was
absolutely
in
line
with
our
guidance
and
expectation,
as
I
said.
So,
also
in
2022
and
2023
we
do
continue
to
execute
cost
reductions
of
between
$50
million
and
$100 million
per
year
through
the
LEAP
program,
and
I
can
tell
you
that
all
the
costs
that
we
can
control
are
on
track.
However,
we
also
see
now,
of
course,
is
that
there
are
counter
effects
resulting
from
high
inflation,
for
example,
logistics
and
labor
cost,
and
also
potential
projects
that
we
will
decide
like
the
MDI
project.
And
last
but
not
least,
also
the
new
climate-related
investments
that
are
necessary
in
order
to
reduce
our
greenhouse
gas
emissions,
as
Marcus
just
elaborated
on.
So,
as
the
graph
indicates,
with
that
we
will
have
to
face
some
counter
effects
in
the
years
2022
and
2023,
but
we
remain
fully
committed
to
tightly
manage
our
fixed
cost.
And
just
one
example
of
that,
counter
effect,
you
find
on
page
20,
because
I
think
just
shows
you
this
unprecedented
challenge
with
the
global
energy
costs
more
than
doubling
within
two
years.
So
as
you
can
see,
the
global
energy
costs
are
significantly
increasing
in
2021,
mainly
driven
by
the
European
energy
prices.
And
you
can
see
this
in
the
blue
columns
in
the
upper
part
of
the
chart.
So
global
energy
costs
for
Covestro
in
2021
where
€1
billion
and
thereof
€0.6
billion
were
driven
by
electricity
and
€0.4
billion
were
driven
by
natural
gas.
And
if
you
break
that
down
on
a
region-by-region
basis,
I
can
tell
you
that
70%
of
that
is
in
the
EU,
20%
is
in
Asia
and
10%
is
in
the United
States.
So
the
lower
part
of
the
chart
depicts,
by
some
key
countries,
the
specific
price
development
for
electricity
and
natural
gas.
And
you
can
see,
first
of
all,
the
significant
increases,
but
also
the
regional
differences.
So
that
based
on
our
actual
breakdown,
our
global
energy
bill
in
2022
is
expected
to
be
at
€1.5
billion.
And
again,
you
see
this
in
the
light
blue
bar
on
the
upper
half
of
the
chart.
So,
if
we
put
it
all
together
and
you
go
to
page
21,
we
are
expecting
an
EBITDA
in
2022
again
about
the
mid-cycle
earnings
level.
The
mark-to-market
estimate
stands
at
about
€3.3
billion
based
on
the
January
data.
And
that
is
above
the
upper
end
of
our
EBITDA
guidance
corridor.
And
that
EBITDA
guidance
is
€2.5
billion
to
€3
billion,
reflecting
expectations
on
an
increase
in
competitive
pressure
during
the
course
of
2022.
I
would
also
like
to
say
that
the
mid-cycle
EBITDA
level,
we
now
see
that
€2.5
billion
after
a
step
up
compared
to
2021
which
is
attributable
to
the
RFM
acquisition
and
the
mid-cycle
EBITDA
should
increase
to
€2.8
billion
until
2024,
driven
by
the
business
growth
and
of
course,
also
the
realization
of
the
RFM
synergies.
So,
what
I
would
also
say
is
that
based
on
the
industry
supply
and
demand
forecast
that
we
see
for
the
next
years,
the
EBITDA
is
expected
to
remain
above
the
mid-cycle
levels
for
the
next
years.
And
with
that,
I
would
like
to
come
to
the
concrete
outlook
for
2022
on
page
22
and
as
you
can
see,
it
contains
two
new
KPIs.
So
first
of
all,
EBITDA
is
replacing
core
volume
growth,
and
that
reflects
our
ongoing
way
from
volume
growth
towards
value-driven
growth.
And
secondly,
there
is
an
ESG
KPI
measuring
the
greenhouse
gas
emission
measured
in
metric
million
tons
for
absolute
CO2
equivalents
in
Scope
1
and
Scope 2.
The
free
operating
cash
flow
outlook
is
in
line
with
our
EBITDA
outlook,
as
I
explained
a
minute
ago,
and
the
number
stands
at
€1
billion
to
€1.5
billion.
And
in
terms
of
ROCE
above
WACC,
the
outlook
is
between –
the
outlook
is
that
we
have
the
WACC
of
7
percentage
points
in
2022
after
6.6%
in
2021,
and
we
expect
an
over
achievement
so
ROCE
over
WACC
between
5
percentage points
and 9
percentage
points.
Greenhouse
gas
emissions
we
expect
between
5.6
million
and
6.1
million
metric
tons.
And
the
increase
is
mainly
attributable
firstly
to
the
composition
of
the
externally
procured
power,
which
is
less
favorable
for
us
and
secondly
to
the
growth
of
the
business.
And
last
but
not
least,
I
would
like
to
mention
our
guidance
for
the
EBITDA
in
Q1.
So,
we're
expecting
between
€750
million and
€850
million
and
even
with
the
lower
end
of
this
guidance
range,
we
would
be
above
the
previous
year
level
of
€743
million.
So
let's
turn
to
the
next
page,
which
shows
our
CapEx
development
so
unchanged
and
we
end
with
the
highest
priority
is
the
investment
into
profitable
organic
growth
because
we
do
think
that
we
are
delivering
attractive
returns
based
on
our
industry
and
cost
leadership.
So
for
2022,
we
have
expected
total
planned
CapEx
of
€1
billion
and
that
includes
€0.6
billion
expansion
CapEx
and
€400
million
of
maintenance
CapEx.
And
this
planned
year-on-year
step
up,
especially
in
expansion
CapEx,
includes
our
single
largest
CapEx
project,
which
is
currently
our
aniline
expansion
in
Antwerp
in
Belgium.
And
of
course,
we
will
continue
to
maintain
an
adequate
level
of
maintenance
CapEx
to
secure,
safe
and
reliable
and
efficient
operations.
So
with
that,
let
me
come
to
the
topic
of
the
dividend
on
page
24,
we're
proposing
€3.40
per
share.
That
is
the
highest
dividend
in
the
Covestro
history.
We
had
communicated
our
new
payout
corridor
between
35%
and
55%.
We
said
that
in
strong
years,
we
would
probably
be
in
the
lower
half
of
the
corridor
and
in
weaker
years
in
the
upper
half
of
the
corridor.
And
as
we
consider
2021
to
be
a
strong
but
not
a
peak
year,
the
payout
ratio
of
41%
is
pretty
much
in
the
middle
of
the
lower
half.
So
that
explains
the
context.
And
of
course,
the
upcoming
AGM
on
April
21
should
then
ratify
the
proposal
that
we're
making.
So
on
the
next
page,
you
can
see
the
details
on
the
share
buyback
program,
which
we
announced
yesterday,
we
announced
to
buy
back
shares
of
€500
million
over the
next two
years €500
million over
the
next
two
years.
And
we
do
see
a
share
buyback
as
an
additional
option
to
create
value
for
our
shareholders
because
it
optimizes
the
capital
structure
for
the
group
and
of
course
it
increases
the
earnings
and
the
dividend
per
share.
And
with
this
decision,
I
would
like
to
reiterate
and
explain
also,
and
you
can
see
this
in
the
right
hand
side
in
the
box,
our
priorities
in
terms
of
capital
allocation.
So,
what
is
unchanged,
our
number
one
priority
is
profitable
growth
through
capital
expenditures,
and
I
was
talking
about
the
CapEx
spending
for
next
year
on
one
of
the
previous
pages.
Secondly,
we
do
want to
maintain
an
attractive
dividend
payout.
And
I
think
the
proposal
that
we're
making
for
2021
is
underlining
that.
However,
what
we
currently
see
is
that
large
acquisitions
currently
for
us
have
a
lower
priority.
This
is
also
driven
by
the
fact
that
we
see
that
the
multiples
that
are
currently
paid
in
the
market
make
it
very
difficult
for
us
to
find
value
creating
M&A
activities
for
us,
at
least
on
the
larger
scale.
And
you
know
that
we
are
very
much
value
driven
and
selective
here.
And,
therefore,
as
I
said,
the
priority
for
large
acquisitions
currently
is
lower.
And
that then
leads
me
to
a
share
buyback
because
we
do
think
that
currently
the
investment
into
our
own
shares
is
a
very
attractive
investment
opportunity
that
we
have.
And
just
to
conclude
it,
of
course,
we
do
remain
committed
to
a
solid
investment
grade
rating.
And
with
that,
I
would
like
to
hand
it
back
to
Markus.
M
Markus Steilemann
Yeah.
Thanks
a
lot,
Thomas.
And
before
we
now
entered
into
the
Q&A
session,
please
allow
me
to
quickly
summarize.
Our
EBIDTA
increase
in
full
year
2021
was
driven
by
positive
pricing
data,
and
we
were
able
of
passing
through
the
unprecedented
raw
material
inflation.
Secondly,
we
plan
to
–
we
suggest
to
the
annual
general
meeting
a
record
dividend
of
€3.40
per
share
for
full
year
2021,
with
a
dividend
yield
of
6.3%
based
on
year-end
share
price.
Thomas
just
alluded
to
a
share
buyback
program
of
€0.5
billion
that
has
been
launched
using
the
opportunity
to
create
value
for
our
shareholders.
The
full
year
2022
earnings
outlook
is
again
above
mid-levels
based
on
solid
sales
growth
and
a
strong
start
into
the
first
quarter
of
2022.
And
we
also
announced
our
climate
neutrality
in
2035
ambitions after
as
an
important
intermediate
milestone
a
60%
reduction
of
greenhouse
gas
emissions
referring
to
Scope
1
and
Scope
2
in
2030.
So
all
in,
looking
ahead
means
expecting
profitable
growth
into
a
climate-neutral
future.
Thanks
a
lot.
And
now
we're
looking
very
much
forward
to
your
questions,
and
I'm
handing
back
to
the
operator.
Thanks
a
lot.
Operator
Thank
you.
Ladies
and
gentlemen,
at
this
time,
we'll
begin
the
question-and-answer
session.
[Operator Instructions]
Okay.
And
the
first
question
for
today
comes
from
Mr.
Christian
Faitz,
who's
calling
from
Kepler
Cheuvreux.
Over
to
you.
C
Christian Faitz
Analyst, Kepler Cheuvreux
Yes.
Good
afternoon,
everybody.
Good
afternoon
Markus,
Thomas
and
Ronald.
Two
questions
if
I
may,
first
one,
I
know
your
sales
exposure
into
Russia
and
Ukraine
is
rather
limited.
Yet
looking
at
some
of
your
major
customer
sales
exposures
in
these
regions,
I
am
thinking
of
IKEA
in
furniture
or Henkel
in
adhesives.
Would
you
see
those
sales
into
these
major
customers
being
impacted?
And
can
you
give
us
an
idea
of
how
impacted
those
would
be?
And
then,
second
question,
your –
is
it
still
your
plan
to
come
to
a
decision
where
to
build
the
new
MDI
plant
by
the
middle
of
this
year?
Thank
you.
M
Markus Steilemann
Yeah.
Christian,
great
to
hear
from
you,
and
let
me
answer
the
following way.
For
sure,
we're
looking
into
individual
customers
that
have
exposure
to
Russia,
and
for
sure,
we
are
also
looking,
let's
say,
into
specific
industries
that
have
exposure
into
Russia.
But
currently
it
is
way
too
early
to
speculate
or
start
speculating
about
how
that
from
a
macro
perspective
and
also
from
an
overall
industry
perspective,
would
impact
our
own
sales
because
there's
so
many
influencing
factors
that
it
is
really
currently
difficult
to
predict.
One
thing
that
I
would
like
to
make
sure
is
that
we
understand
we
have
numerous
assumptions
from
a
macro
perspective,
but
also
numerous
assumptions
from
individual
industry
perspectives.
And
so,
if
some
of
those
aspects
are
maybe
not
exactly
in
the
order
of
magnitude,
as
we
currently
expected
today,
we
do
see
very
limited
to
maybe
even
no
impact
on
our,
for
example,
current
guidance
for
the
year.
For
sure,
if
there
would
be
massive
influence,
for
example,
global
GDP
would
go
massively
down,
maybe
even
half
or
even
go
[indiscernible]
(00:39:17)
that
would
have
an
impact,
but
it
is
way
too
early
to
say
that.
And
that's
why
we're
also
factoring
in
what
we
currently
can
see,
and
that
is
also
what
you
see
reflected
in
the
current
guidance.
So
I
hope
that
answers
the
first
part
of
your
questions.
And
in
that
context,
you
also
have
to
see
that
Russia
is
only
representing
2%
of
global
GDP.
Therefore,
a
spillover, let's
say, effect
should
be,
at
least
from
today's
perspective,
limited.
I
know
that
there's
different
scenarios
out
there,
but
we're
closely
monitoring
the
situation.
And
but
today,
honestly
speaking,
this
is
the
position
we
have,
and
this
is
also
what
we
today
can
say
to
this.
On
MDI,
we
have
always
been
clear
that
we
will
come
to
a
decision
end
of
third
quarter
beginning
of
fourth
quarter.
So
that
means
after
the
summer
holiday,
you
will
hear
more
about
that.
C
Christian Faitz
Analyst, Kepler Cheuvreux
Thanks,
Markus. Thank
you
very
much.
M
Markus Steilemann
Thanks, Christian.
Operator
The next
question
comes
from
Mubasher
Chaudhry, he's
calling
from
Citi.
Over
to
you.
M
Mubasher Chaudhry
Analyst, Citigroup Global Markets Ltd.
Hi. Thank
you
for
taking
my
questions. First
one
is
on
the
guidance.
Can
you
please
talk
about
some
of
the
moving
parts
which
get
you
from
the
bottom
end
of
the
guidance
at
€2.5
billion
to
€3
billion
range
from
[indiscernible]
(00:40:42)
And
then
second
one on
industry
utilizations.
Could
you
provide some
thoughts
on
the
MDI,
TDI
utilizations
in
2021
and
where do
you
see
them
going
for
2022?
Thank
you.
T
Thomas Toepfer
Yeah,
so
this is
Thomas.
The
sound
quality
was
a
little
bit
poor.
So
I'm
trying
to
answer
the
first
question
if
it's
not
spot
on,
please
let
me
know
and
then
I
will
try
to
repeat
it.
M
Mubasher Chaudhry
Analyst, Citigroup Global Markets Ltd.
Thank
you.
T
Thomas Toepfer
So
what
I
understood
your
question,
what
is
the –
what
would
bring
us
to
the
bottom
end
and
the
top
end
of
the
guidance?
So,
I
think
there are
two
major
factors.
One
is
you
should,
of
course,
know
that
we
are
assuming
a
growth
factor
for
2022.
So
a
mid-to-high
single
digit
number
growth.
That
is
factoring
in
the
assumption
that
we
will
have
lower
unplanned
shutdowns
than
we
had
in
2021
and
that
we
will
simply
have
a
higher
uptime
for
our
own
plants.
And
secondly
on
the
negative
side,
it
is
assuming
essentially
a
negative
pricing
delta
of
$1
billion
because
we
do
see
that
there
is,
especially
in
Asia,
new
capacities
for
polycarbonates
coming
to
the
market,
and
we
already
are now
seeing
some
pricing
pressure
on
for
polycarbonate
in
that
region.
So,
now
how
exactly
that
will
play
out
is,
of
course,
the
big
question.
But,
therefore,
the
lower
end
of
the
guidance
simply
assumes
that
we
will
again
have
some
unplanned
shutdowns
and,
therefore,
not
deliver
the
full
growth
potential.
So,
rather
in
the
mid-single
digit
range
and
the
other
factor
and
every
percentage
point
of
growth
is
some
€80
million
of
EBITDA,
just to
give
you
the
order
of
magnitude.
And
the
other,
of
course,
is
the
pricing
delta.
We
do
think
that
$1
billion
is
a
reasonable
number
and
you
can
see
that
the
pricing –
the
mark
to
market
today
stands
at
3.3%,
so
that
also
shows
you
the
order
of
magnitude
that
we've
factored
in.
But,
of
course,
things
can
move
quickly.
However,
I
would
also
like to
be
a
little
bit
more
[indiscernible]
(00:42:47) we
currently
do
see
that
Q1
is
on
a
very
good
track
and
the
fact
that
we're
guiding
between $750
million
to
$850
million,
so
above
the
previous
year
is
maybe
proof-point
to
that.
So,
I
think
those
are
the
factors,
the
swing
factors
between
the
lower
and
the
upper
end of
the
guidance
for
EBITDA.
M
Markus Steilemann
Yeah.
And
thanks,
Thomas,
also
here
if
you
would
like
to
have
a
bit
more
flavor
on
the
individual
product
groups,
MDI,
TDI,
polycarbonate,
as
well
as
our
standard
polyols;
let's
take
a
look
at
MDI
first.
So
we
actually
assume
that
based
on
nameplate
capacity,
last
year,
we
had
an
industry
utilization
of
around
90%
for
the
full
year.
And
we
expect
given
the
continued
demand,
but
also
the continued,
let's
say,
supply
additions
that
we
see
that
we
should
move
above
90%
in
full
year
2022,
the
maybe
well-known
one
ramp-up
last
year
and
early
2021
expansion
should
be
more
or
less
already
being
absorbed
by
the
market.
And
then,
at
the
same
time,
I
believe
that
we're
currently
in
a
situation
where
things
can
turn
north
and
south.
That
means
we're
in
a
situation
where
we
have
a
balanced
MDI
market,
but
I
would
lean
currently
more
towards,
let's
say,
a
market
that
would
change
to
be
a
little
bit
undersupplied,
if
there's
no,
let's
say,
major
disruptions
happening
in
one
or
the
other
direction.
On
TDI
margins,
it's
slightly
a
different
story
because
nameplate
capacity,
we are
operating
at
rates
and
full
year
2021
at
around
73%.
That
would
indicate
that
there
would
have
been
little
pricing
power,
but
we
have
seen
actually
the
opposite
in
the
overall
market.
And
also
given
that
the
available
capacity
based
on
planned
or
unplanned
shutdowns
is
actually
much
lower
than
the
nameplate
capacity
also
expected
overall
structurally,
the
situation
improves,
but
we
also
may
benefit
a
little
bit,
let's
say,
from
this
current,
let's
say,
lack
of
availability
of
some
TDI
plants
around
the
world.
So
long
story
short,
if
you
look
at
the
overall
[ph]
long-term (00:45:00)
development,
the
announcement
until
2026,
the
supply
growth
and
on
the
other
hand,
demand
growth
in
TDI,
we
expect
that
we
will
see
a
further
improving
industry
utilization
rate
and
especially
in
2022
and
2023,
the
announced
capacity
additions
would
only
sum
up
to
1%
by
the
year –
each
year.
So
that
also
gives
you
flavor
on
TDI.
Standard
polyols
and
the
really
relevant
markets
for
Covestro,
which
is
Europe
and
North
America,
you
could
see
that
the
– let's
say
industry
margin
levels
are
assumed
to
be
extraordinarily
high.
That
means
more
than
twice
as
high
as
historic
average.
And
the
reason
for
that,
let's
say,
margin
peak
was
that
we
had
several
production
limitations
[indiscernible]
(00:45:51)
of
larger
producers,
and
I'm
not
going
down
the
entire
list
now.
We're
seeing
a
recovery
of
the
supply
in
Europe
and
North
America,
and
that
would
indicate
further
margin
normalization
during
that
year.
That
might
be
on
the
other
hand,
potentially
cushioned
by
planned
turnarounds
in
the
second
quarter
by,
for
example,
Dow
and
Shell
in
Europe,
but
also Lyondell (sic) [LyondellBasell] (00:46:11)
and
Dow
in
North
America.
So
overall,
we
have
seen
that
in
China
already
decline –
there
is
some
margin
decline
happened
to
more
normal
levels
and
with
the
rest
of
Asia
Pacific
to
follow.
And
it
remains
to
be
seen
how
that
spillover
effect
will
look
like
for
Europe
and
US,
because
currently
that
is
limited,
particularly
by
the
increased –
significantly
increased
supply
chain
costs
that
we
talked
already
about
in
a
different
context
and
reliability
of
the
essence.
So
last
point,
and
Thomas
has
alluded to
that
already
quite
a
bit
on
the
polycarbonate
and
here
I'm
particularly
referring
to
the
commodity
part.
Yeah,
in
our
performance
materials
segment,
so
the
standard
polycarbonate
types,
we
assume
that
we
will
see
a
further
decline
of
the
nameplate
capacity
utilization
from
69%
last
year
to
around
65%
in
the
full
year
2022.
And
we
also
see
that
there's
additional
capacity
until
2026
coming
in.
So
we
have
a
supply
growth
of
5%
to
6%,
which
is
above
average
annual
demand
growth
of
4%.
That
would
also
then
indicate
that
it
would
lead
to
a
further
decline
in
industrialization
rates.
So
long
story
short,
supply
additions
expected
to
peak
this
year
and
so
on
and
so
forth.
Long-term
supply
growth
is
expected
to
further
decline.
Nonetheless,
we
are
in
a,
let's
say,
rather
challenging
situation
with
regard
to
standard
polycarbonates.
However,
and
I
think
we
have
made
that
very
clear,
we
are
moving
away
from
the
commodity
and
standard
polycarbonate
for
Covestro,
the
volume
share
of
standard
polycarbonates
now
in
the
segment
Performance
Materials
versus
the
total
polycarbonates,
declined
from
65%
in
2010
to
only
32%
in
2020
and
we're
expecting
27 –
sorry,
we
saw
27%
in
2021,
and
we
expect
that
share
to
further
declining
to
25%
to
20%.
And
that
shows
you
very
clearly
that
our
exposure
to
that
segment
is
decreasing
by
the
day
and
our
exposure
to
the
high
value
segment
is,
let's
say,
increasing
by
the
day.
And
that
should
give
you
also
some
comfort
about
how
we
are
cushioning
this.
Nonetheless,
Thomas
has
alluded
to
that
what
that
overall
could
mean
for
all
four
product
routes
in
terms
of,
let's
say,
pricing
effect
in
2022.
It
was
a
long
answer.
However,
I
think
it's
important
to
get
the
full
picture
so
that
you
have
a
better
flavor
how
to
look
at
our
guidance
and
also
the
year
ahead.
M
Mubasher Chaudhry
Analyst, Citigroup Global Markets Ltd.
Very
thorough.
Thank
you
very
much.
Operator
The
next
question
comes
from
Geoff
Haire,
who's
calling
from
UBS.
Please
go
ahead.
G
Geoff Haire
Analyst, UBS AG (London Branch)
Oh,
good
afternoon
and thank
you
for
the
presentation
and
the opportunity
to
ask
some
questions.
I
have
two
related
to
energy.
So
if
I
look
at
slide
20,
if
I'm
reading
that
right,
I
think
you're
saying
that
there's
a
€500 million
increase
in
the
energy
bill
in
2020.
But
if
I
look
on
a
mark-to-market
basis
that
the
graphs
and
information
we
can
see,
it
would
imply
that
this
could
be
significantly
higher
than
€500
million.
So
is
there
offsets
with
hedging
or
long-term
energy
pricing
contracts
that
you
have,
wondering
if
you
could
discuss
that?
And then
also
connected
with
this,
do
you
expect
energy
costs
to
continue
to
be
high
relative
to
where
we
were
last
year
in
2023
or
do
you
assume
some
normalization?
T
Thomas Toepfer
Well, Geoff,
this
is
Thomas.
Your
last
question
certainly
is
the
$100
million
question.
So
let
me
start
with
the
first
one –
exactly.
The
numbers
in
the
light
blue
columns
that
you
see
is,
yes,
we
had
€0.6
billion
energy
costs
in
2020,
€1
billion
last
year.
And
we
were
expecting
€1.5
billion
for
2022
in
our
plans.
If
you
mark
that
to
market
with
yesterday's
levels,
you're
right
it
would
be
slightly
higher,
roughly
€1.7
billion.
But,
again,
I
would
say
in
the
overall
context,
we
have
shown
that
we
were
able
to
pass
through
energy
cost
rises
quite
successfully
in
2021,
and
therefore,
this
daily
mark-to-market,
which
really
has
quite
an
amplitude
over
the
last
number
of
days,
would
not
lead
us
to
change
our
guidance.
But
you're
right,
the
€1.5
million
would
be
€1.7
million
as
of
yesterday.
What
are
we
expecting
for
2023,
it's
really
more
the
volatility,
which
is
a
challenge
and
not
the
absolute
level,
because
you've
seen
this
specifically
in
our
Solutions
&
Specialty
segment,
where we
are somewhat
slow to
adjust contracts
to
price changes,
simply
because
they
are
longer
running.
However,
if
it
is
a
longer
plateau
on
a
high
level,
our
view
is
that
also
the
Solutions
&
Specialty
segment
should
be
able
to
pass
this
onto
the
customers.
And
therefore,
as
I
said,
we're
not
so
much
concerned
with
the
absolute
level,
but
more
with
the
volatility
in
the
energy
prices.
G
Geoff Haire
Analyst, UBS AG (London Branch)
Okay. I'll just
ask
a
quick
follow-up.
Within
your
sort
of
multi-year
contracts
that
you
have
for
MDI
or
polycarbonate,
do
you
have
energy
pass-through
clauses
on
those?
M
Markus Steilemann
Yeah.
Essentially,
we
do
not
have
longer-term
contracts
for
MDI
and
TDI.
So
those
are
one-month
rolling
contracts,
if
you
like.
I
mean,
there
might
be
a
frame
contract
with
the
minimum
and
maximum
quantities,
but
the
prices
are
essentially
adjusted
on
a
monthly
level,
and
therefore,
there
is
no
automatism.
So
there
is
not
an
automatic
price
adjustment
clause,
but
there
is
a
monthly
renegotiation
of
the
prices,
which
is
the
standard
in
the
industry.
G
Geoff Haire
Analyst, UBS AG (London Branch)
Okay.
Thanks.
Operator
The
next
question
comes
from
Thomas
Swoboda,
who's
calling
from
Société
Générale.
Please
go
ahead.
T
Thomas Swoboda
Analyst, Société Générale SA (Germany)
Yes.
Good
afternoon,
everybody.
I
have
two
questions
left,
please.
Firstly,
on
CapEx,
can
you
give
us
a
sneak
preview
on
the
next
couple
of
years
in
the
light
of
the
investment
in
sustainability
and
the
MDI
plant,
wherever
it
would
be
built?
So when
do
you
see
the
peak?
What
is
the
peak
CapEx
roughly
whatever
you
can
say?
And
the
second
question
is
on
your
emission
targets,
an
important
driver
is
the
renewable
energy.
My
question
is
how
much
of
this
renewable
energy
you
have
in
your
planning?
You
are
going
to
acquire
yourself,
meaning,
how
much
is
under
your
control
and
how
much
do
you
rely
that
basically
the
governments
will
provide
enough
green
energy,
so
you
can
reach
your
targets?
Thank
you.
T
Thomas Toepfer
Yeah,
Thomas,
this
is Thomas.
Let
me
take
the
first
question
on
CapEx.
And
of
course,
I
mean,
the
sneak
preview
is
somewhat
dependent
on
the
decision
that
we
take
after
the
summer
break,
as
Markus
said.
But
let's
assume
just
for
a
minute
that
we
were
to
decide
to
build
MDI
irrespective
of
which
region
it
is,
then
I
think
you
should
expect
another
step-up
in
2023
of
between
€100 million
and
€200
million.
And
you
should
expect
the
peak
to
occur
roughly
in
2025,
with
up
to
€1.5
billion
for
work.
You
also
put
this
in
context
with
our
investment
for
carbon-neutrality.
We
said
that
we
would
spend
€1
billion
over
the
next
10
years.
I
think
that
just
shows
you
the
absolute
CapEx
number
that
we
need
to
achieve.
The
target
is
not
the
big
swing
factor
here;
simply
because
we
have
not
stranded
assets.
We
can
fully
operate
our
assets
as
they
are
with
drop-in
solutions,
so
renewable
input
factors.
We
have
to
switch
the
energy
to
green
energy
supply.
We
have
to
switch
them
to
green
steam.
But
we
don't
have
to
invest
big
ticket
items
for
completely
new
installations
because,
as
I
said,
the
ones
that
we
have
do
work
with
drop-in
solutions
and
are
not
stranded
assets. And
I
think
that
just
puts
into
context
that
the
ticket
for
our
carbon
neutrality
path
is
not
the
big
swing
factor
in
our
CapEx
planning
M
Markus Steilemann
Yeah, and
Thomas, if
I
may
say
so –
it is
Markus
speaking.
That
plan
has
as
Thomas
alluded
three
big
ticket
items
not
in
terms
of
costs
but
where
we
want
to
focus
on
in
terms
of
levers,
how
to
make
our
Scope
1
and
Scope
2
emissions
climate-neutral
by
2030.
Part
of
it
is
for
sure
that
we
have
expectations
on
how
the
overall
electricity,
let's
say,
production
will
look
like
in
a
specific
country.
However,
we're
not
entirely
or
even,
to
a
large
extent,
relying
on
that.
And
proof
of
that
is,
for
example,
how
we
have
so
far
managed
that.
We
actually
closed
a
big
deal
at
that
time,
the
largest
ever
made,
let's
say,
private
deal
between
two
companies
on
renewable
energy,
which
[technical difficulty] (00:55:59) where
we
expect
about
10%
of
the
electric
demand
of
our
production
facilities
by
2025
being,
let's
say,
supported
by
a
wind
farm
of
Ørsted
in
the
North
Sea.
We
have
actually
done
a
similar
deal
with
the
company
ENGIE
for
our
production
plant
in Antwerp,
covering
already
since
last
year,
April 1,
45%
of
the
electrical
energy
demand.
And
we
have
now
actually
sun-powered
electricity
that
covers
around
10%
of
the
electrical
demand
of
our [ph]
charging
sites (00:56:30).
So
you
see
that
regardless
of
what
the
state
is
doing
and
how
the
state
grid
energy
mix
looks
like,
we
are
also
pursuing
own
options
to
buy
our
own
electricity
to
make
sure
that
we
achieve
that
target.
And
we
will
for
sure
adopt
this
depending
on
how,
let's
say,
the
overall
development
will
look
like.
So
that
flexibility
is
built
in
for
sure.
At
one
point
in
time,
you
have
to
jump
and
you
have
to
make
a
decision.
For
example,
the
Ørsted
contract
was
actually
signed
in
2019.
It
takes
six
years
to
build
a
wind
park,
and
therefore,
at
one
point
in
time,
we
have
to
say
no
matter
what
the
state
does,
we
secure
our
own
energy.
But
on
the
other
hand,
that
is
not
different
from
what
we
are
currently
doing,
let's
say,
with
fossil-based
energy
also
here,
we
have
own
supply
agreements
with
individual
companies.
And
also
here
we
already
had
the
chance to
say
how
much
green
electricity
we
want
to
have
and
so
on
and
so
forth.
So
long
story
short,
that
is
not
carved
in
stone,
and
it
is
not
relying,
let's
say,
on
individual
governmental
decisions,
but
rather
a
flexible
approach
that
we
have
within
the
three
major
levers
that
we
have
described
in
the
presentation.
T
Thomas Swoboda
Analyst, Société Générale SA (Germany)
Very
clear.
Thank
you,
both.
Operator
Thank
you.
The
next
question
comes
from
Matthew
Yates
calling
from
Bank
of
America.
Please
go
ahead.
M
Matthew Yates
Analyst, Bank of America Merrill Lynch
Hi.
Good
afternoon.
A
couple
of questions,
please.
Just
to
clarify
on
the
mark-to-market
calculation,
are
you
assuming
mid-to-high
single-digit
volume
growth
within
that
math?
That's
the
first
question.
The
second
question
to
Markus,
maybe
going
back
to
slide
17,
on
your
polycarbonate
mix.
Thanks
for
the
detail
there.
When
you've
talked
in
this
call
about
intensified
competition,
can I just
check,
is
that
specifically
on
these
more
standard
products?
Are
you
also
seeing
competition
creep
into
the
more
sophisticated
areas?
And
if
I
could
ask
a
third
one
around
the
buyback,
just
out
of
curiosity,
the
decision
to
do
this
over
two
years
rather
than
one
year,
can
you
just
explain
the
thought
process
there?
And
I
guess,
it's
not
really
a
question
of
approvals
but
more
living
within
the
financial
framework. And
if
that
was
the
case,
then
was
there
any
debate
about
adopting
a
sort
of
more
modular
approach
over
a
shorter
time
period
that
you
could
revisit
and
update
over
time
depending
how
things
evolve?
Thank
you.
T
Thomas Toepfer
Yeah.
Let
me maybe
start
with
the
first
question
on
the
mark-to-market,
so
yes,
that
essentially
takes
into
account
the
current
pricing
level
or current
margin
level,
I
should
say
as
of
January.
And
if
you
multiply
this
then
out
with
our
volume
assumption
for
2022,
so
the
mid-
to
high-single-digit
growth
rate
that
we
see.
So
that
is
essentially
the
product
that
gives
you
then
the
€3.3
billion.
And
as
I
said,
1
percentage
point
of
growth
essentially
translates
into
€80
million
of
EBITDA
as
an
effect.
I
could
also
directly
cover
the
share
buyback
question.
So
we
always
said
that
a
share
buyback,
we
would
do
this
in
a
opportunistic
and
anti-cyclical
way.
So
we
do
feel
that
the
two-year
horizon
gives
us
the
flexibility
to
do
exactly
this.
There
was
not
a
big
debate
because
secondly,
we
also
see
this
as
market
standard,
and
therefore,
we
do
feel
that
both
from
a
company
but
more
specifically
from
a
shareholder
perspective,
this
is
the
right
approach
to
give
us
the
time
to
really
act
flexibly,
and
as
I
said,
opportunistically
with
respect
to
the
share
buyback.
M
Markus Steilemann
Yeah. And
on
the
third
question,
as
you
alluded to,
more
sophisticated
or
the
non-sophisticated
part,
if
I
assume
that
you
mean
with
non-sophisticated
part,
the
standard
polycarbonates,
that
is
where
the
competition
is
really
in
full
swing,
that
is
where
we
also
expect
the
market
to
really
heavily
compete.
And
that
is
exactly
why
we
long
term
ago
already
have
moved
away
and
doing
that
with
increasing
speed
over
the
next
years
from
that
particular
segment.
Nonetheless,
we
are
very
competitive
in
this
market
to
be
absolutely
clear.
We
have
large
assets,
we
use
high
economy
of
scales
and
we
continuously
and
particularly
now
in
a
new
structure
focusing
on
cost-leading
positions
in
all
regions
with
all
assets
where
we
produce
to
make
sure
that
we
always
get
the
best
out
of,
let's
say,
our
investments
here
and
compete
as
tough
as
possible
and
as
dedicated
as
possible
in
that.
Do
we
see
similar
trends
in
the
sophisticated
grades?
Honestly
speaking,
no.
Why?
We
have
some
local
competitors
here
and
there
who
try
to
do
the
same
trick
that
we
do.
But
we
have
to
consider
that
this
is
a
more
a
technology
platform
approach
for
the
sophisticated
grades
of
polycarbonate.
What
do
I
mean
with
that?
You
have
to
understand
how
all
the
technologies
work
together,
you
have
to
have
the
ability
to
invest,
you
have
to
have
the
ability
to
have
critical
mass
also
to
have
this
research
and
technology
platform
really
having
leading-edge
technologies.
And
the
newest
trend
here
is,
for
example,
the
digitalization,
simulation
kicks
in,
with
all
the
new
calculation
capacity,
supercomputing,
high-performance
computing,
even
quantum
computing.
And
by
that,
you
could
even
further
accelerate,
let's
say,
your
development
speed
towards
customers
with
regard
to
that
technology
platform.
That
makes
it
more
and
more
difficult
for
smaller
local
competitors
to
really
step
in.
And
that
means
you
need
to
have
global
reach,
global
scale
and
access
to
those
technology
platform
levers.
Otherwise,
you
will
not
be
able
to
really
compete
in
that
market.
And
therefore,
that
is
a
market
for the
big
ones,
that
is
a
market
for
the
fast
ones,
and
that
is
a
market
for
the innovative
ones.
Therefore,
we
feel
[indiscernible]
(01:02:40)
position
in
the
segment
no
matter
how
competition
looks
like.
M
Matthew Yates
Analyst, Bank of America Merrill Lynch
Okay.
Thank
you
for
taking
the
time.
Operator
Thank
you.
The
next
question
comes
from
Georgina
Fraser,
who is
calling
from
Goldman
Sachs.
Please
go
ahead.
G
Georgina Fraser
Analyst, Goldman Sachs International
Thank
you
and
good
afternoon,
Markus
and
Thomas.
Thanks
for
taking
my
questions.
I
have
two.
The
first
one
is
–
just
looking
a
bit
further
up
the
supply
chain
in
Russia,
I
understand
it's
quite
difficult
to
predict
how
demand
might
be
impacted.
But
are
there
any
key
raw
materials
in
either
your
own
supply
chains
or
competing
chemical
product
supply
chains
that
you
think
will
be
affected?
And
then,
my
second
question
is,
do
the
recent
geopolitical
tensions
raise
the
importance
of
delivering
your
circularity
targets?
And
how
would
you
characterize
the
opportunities
or
benefits?
And
for
a
chemical
company,
that
is
switching
to
more
diversified
feedstocks?
M
Markus Steilemann
Yeah, Georgina,
thanks
for
the
questions.
While
the
Russian
supply
chain –
petrochemicals
are,
let's
say,
limited
in
that
sense,
if
you
look
at
the
[indiscernible]
(01:03:56)
prices,
for
example,
in
Europe,
they
just
settled
only
slightly
up.
And
if
you
look
into
specific
raw
materials
that
we
have
versus
competing
products,
we
have
done
so
far
only
our own
analysis
and
we
do
not
see
currently
any
short,
not
even
in
all
the
cases,
any
mid-term,
let's
say,
physical
supply
risks
of
any
of
the
raw
materials
that
we
need
for
our
production.
And
on
the
long
term,
we
anyhow
and
we
have
stated
that
also
in
a
different
context,
in
earlier
conference
calls,
anyhow, to –
or
however
due
to
different
reasons – regions –
reasons,
that
we
want
to
broaden
our
supply
base
to
make
sure
that
we
also
have
here
more
competition
with
regard
to
our
supplier
base.
So,
long
story
short,
we
currently
do
not
see
any
large
effects
on
our
own
supply
chains,
but
currently
I
have
to
say
we
are
not
yet
aware
of
any,
let's
say,
supply
chain
disruptions
of
immediately
competing
products
or
drop
in
products
for
our
solutions.
So,
that analysis
has
not
yet
been
performed.
On
the
second
bit
–
second
question,
we
do
see
a
clear
demand
in
the
markets
for
products
that
are
having
a
higher
share
of
circular
carbon,
let's
say,
in
our
context.
The
challenge
we
are
currently
facing
is
that
we
want
to
build
the
raw
material
markets
for
circular
carbon,
and
that
is
a
key
challenge
because
we
would
have
more
demand
from
our
customer's
side
for
those
products.
We
are
able
to
create
value
and
extract
value
from
those
products,
and
we
get
by
the
day
more
and
more
requests
from
customers
and
consumers,
whether
they
can
have
the
respective
products.
And
that's
why
we
have
very
boldly
moved
forward
on,
let's
say,
renewable
MDI,
on
renewable
TDI,
on
renewable
polycarbonate
exactly
to
address
those
markets.
The
key
challenges
we
have
to
grow
and
to
develop
the
respective
markets
from
a
supplier
side.
Just
to
give
you
a
few
numbers,
last
year,
we
roughly
bought
20,000
tons
of
renewable
certified
respective
raw
materials
that
go
into
our
large
products.
This
year,
we
aim
to
roughly 70,000
tons
to
100,000
tons.
That
would
mean
Sector
3
to
5.
However,
that
still
at
the
upper
end
would
only
represent
2.5%
of
the
total
amount
of
petrochemical
feedstock
that
we're
currently
buying.
So,
long
story
short,
we
see
great
opportunities.
We
also
believe
in
a
first
mover
advantage
to
also
extract
value,
but
we
also
see
the
challenges
to
now
rapidly
scale
up
and
we
are
far,
I
have
to
say
far,
let's
say
from
the
situation
where
this
is
a
major
share
of
our
portfolio.
However,
I
see
mid
of
the
century
that
the
[ph]
overall (01:06:50)
industry
will
be
able
to
supply
maybe
millions
of
tons
of
renewable
carbon
feedstock,
not
necessarily
for
our own
products,
but
in
terms
of
the
overall
industry
supply
and
I
think
also
that
for
mid
of
the
century,
those
investments
will
fully
kick
in,
so
that
we
make
major
progress
here
in
that
regard.
But
I
truly
believe
there
is
a
first-mover
advantage
and
that
is
exactly
what
we
currently
try
to
establish
and
we'll
try
to
also
lock
in
business
with
our
customers.
G
Georgina Fraser
Analyst, Goldman Sachs International
That's
great.
Thank
you.
Operator
Thank
you.
The
next
question
comes
from
Chris
Counihan,
who's
calling
from
Jefferies.
Please
go
ahead.
C
Chris Counihan
Analyst, Jefferies International Ltd.
Thanks, guys.
You've
mentioned,
the
mid
to
high
single
digit
volume
growth
assumptions
for
2022,
but
I
was
just
trying
to
tie
it
back
to
your
10-year
growth
in
greenhouse
gas
emissions
on
slide
6,
in
which
the
orange
bar
implies
average
of
historic
growth
closer
to
1.5%
per
annum
before
the
described
abatement
measures.
And
I
note
at
the
top
end
of
your
guidance
as
well,
you've
already
potentially
used
or
admitted
at
least
half
of
that
in
2022.
So,
are
there
already
some
net
offsets
in
this
orange
bar
over
the
coming
years
or
can
you
help
me
reconcile
that
to
growth
expectations
on
the
volume
side
longer
term?
T
Thomas Toepfer
Chris,
again,
the
sound
quality
was
a
little
bit
poor,
so
I
hope
that
I
can
answer
your
question
correctly.
If
I
understand
correctly,
your
question
is,
how
to
reconcile
the
mid
to
high
single
digit
core
volume
growth
assumptions,
especially
if
you
compare
this
to
the
historic
development.
And
I
would
say,
what
you
have
to
keep
in
mind
is,
in
2022,
first
point,
2021
was
a
poor
year
in
terms
of
operational
uptime
that
we
delivered
for
various
reasons,
some
of
them
external,
like
the
winter
storm,
some
of
them
simply
internal,
we
had
a
major
standstill
in
our
newly
built
MDI
facility
in
Brunsbüttel.
We
had
standstill
in
our
facilities
in
Leverkusen
and
also
in
Dormagen.
So,
it
was
not
a
great
year
and
we
were
actually
operationally
below
the
numbers
in
terms
of
call
volumes
of
2019
still.
So,
we
have
– and
therefore
the
big
effect
that
we're
expecting
for
2022
and it's a
Covestro-specific
effect,
is
that
those
things
will
not
reoccur,
plus
of
course
we
have
RFM
with
us
for
another
quarter,
which
was
not
the
case
in
2021.
And
if
you
take
those
things
together,
together
with
some
call
volume
growth
that
should
come
from
GDP
growth
and
a
catch-up
in
automotive,
and
you've
seen
the
–
the
double
digit
number
that
we
are
projecting,
that
brings
us
then
to
the
mix
number
of
a
mid
to
high
single
digit
number.
So,
there
is
quite
a
bit
of
catch-up
effect
in
there
and
there
is
of
course
some
support
from RFM in
there.
C
Chris Counihan
Analyst, Jefferies International Ltd.
So,
sorry,
Thomas,
I
was
more
referring
to
slide
6
and
mid-single
digits
for
2022,
but
then
slide
6
in
greenhouse
gas
emission
growth
of
– I
think
it's
one
million
metric
tons
over
the
next
decade,
and
asking
if
there is
already
abatement
measures
within
that
[indiscernible]
(01:10:26) on
slide
6,
because
that
would
be
implying
average
Covestro
growth
of
1.5%
per
annum,
when
historically
core
volume
growth
had
been
ahead
of
that.
T
Thomas Toepfer
Now,
I
get
it.
So,
the
–
the
–
of
course,
the –
the
new
volumes
that
we're
growing
are
growing
with
lower
CO2
emissions
than
the
historic
numbers
because
everything
that
we
invest
into
growth will
be
a
newer
technology,
Markus
was
mentioning
things
like
abatement
for
analytics.
We
have
the
high
temperature
[indiscernible]
(01:11:00),
et
cetera,
et
cetera.
So,
all
the
new
technologies
that
we're
building
have
a
lower
CO2
footprint,
plus,
of
course,
the
majority
of
growth,
as
we
have
also
shown
in
one
of
our
early
Investor
Relations
presentation,
takes
place
in
the
Solutions
&
Specialty
segment,
which
by
nature
has
lower
CO2
footprint
and
the
upstream
business.
And
that,
I
think,
is
the –
for
you
the
explanation
why
it's
not
a
one-to-one
relationship.
Sorry,
if
I
misunderstood
your
question
the
first
time.
C
Chris Counihan
Analyst, Jefferies International Ltd.
Thank
you.
Operator
Thank
you.
The
next question
comes
from
Markus
Mayer,
who's
calling
from Baader
Bank.
Please
go
ahead.
M
Markus Mayer
Analyst, Baader Bank AG
Good
afternoon,
gentlemen.
Three
questions
from
my
side
as
well.
The
first
one
is
on
the
RFM
synergies.
Have
been
there
any
specific
reasons
for
the
faster-than-expected
synergies
or
are
these
synergies –
or
the
faster
synergies
coming
from
somewhere
specific,
or
was
it
just
that
you
were
conservative
from
the
tied in
all
our
amount
of
the
synergy
and
also
on
the
cost?
That
would
be my
first
question.
T
Thomas Toepfer
And
directly
to
that,
Markus,
I
mean,
first
of
all,
all
the
operational
synergies
came
in
exactly
as
expected.
Where
we
were
faster
than
expected
is
the
cancellation
of
the
service
agreements
that
we
still
have
with
DCM
for
transitionary
period
and
we
were
able
to
take
over
those
services
in
terms
of
IT,
accounting,
controlling
and
some
other
administrative
functions
earlier
than
what
we
had
put
in
our
plans
and
that
led
to
the
overachievement.
However,
that
is
not
to
say,
to
be
very
clear,
that
the
more
operational
things
in
terms
of
head
count
consolidation
and
also
sales
synergies
through
the
joint
formation
of
laboratories
and
research
programs
is
not
on
track.
It's
also
on
track,
but
the
overachievement
specifically
in
2021
came
through
the
early
cancellation
of
transitionary
service
agreements,
mainly
with
DSM.
M
Markus Mayer
Analyst, Baader Bank AG
Okay,
thank
you.
And
second
question
would
be
on
the
potential
fall-away
of
the
EEG levy
and
Germany,
which
could
be
already
the
case
in
2022.
What
kind
of
effects
do
you expect
for
Covestro?
M
Markus Steilemann
Yeah, it's
currently
really,
I
would
say,
a
little
bit
challenging
to
say
because
the
currently
intended
stop
of
the
EEG
and
also
the
respective
potential
impact
would
mean
that
we
would
only
see
about
one
year
later
a
visible
impact.
And
if
that
would
be
cancelled,
we
would
at
least
[indiscernible]
(01:13:48) the
positive
impact
about, let's
say,
1.2
million
tons
of
less
accounted,
if
you
want to
say
so,
carbon
dioxide
equivalent
emissions,
simply
due
to
the
fact
that
we're
currently
falling
under
this
and
therefore
we
get
the,
if
I
may,
so,
dirty
part
of
the
German
energy
mix
fully
into
our
books.
Once
that
EEG
exemption
is
falling
away,
we
would
also
get
the
German
complete
energy
mix
in
our
books,
and
that
would
lead
to,
as
I
said,
1.
2
million
tons
positive
development
in
terms
of
lowering
our
carbon
dioxide
emission
footprint.
Does
that
answer
your
question?
M
Markus Mayer
Analyst, Baader Bank AG
Yeah,
yeah,
absolutely.
And
my
third
question
would
be
then
on
this,
230,000
tons
of
polycarbonate
compounding
capacities
until
2025.
Can
you
quantify
how
much
CapEx
would
be
needed
for
these
kind
of
capacities?
And
also
how
fast
is the capacity
additions
and also in
what
kind
of
regions.
M
Markus Steilemann
Yeah,
I
think
two
things
are
very
important.
Number
one
is
and
same
like
carbon
dioxide
intensity,
the
capital
intensity
for
those
businesses
is happily
and,
let's
say,
that's
good
that
that
is
actually
much
lower
than
the
intensity
for
the
upstream
businesses
in
terms
of
capital.
So,
normally,
we
would
expect
for
230KT, a
CapEx
in
the
low
triple
digit
million
number.
And
also
the
complexity
to
really
install
it
is
much
lower
than
building,
for
example,
a
fully-fledged
polycarbonate
plant
in
that
order
of
magnitude.
So,
from
that
perspective,
I
would
expect
that
those
CapEx
costs
are
much
lower
than
you
would
expect
for
an
upstream
polycarbonate.
I
would
also
expect
that
we
could
swiftly
execute
and
we
will
definitely
also
execute
this
where
the
key
markets
are
and
the
key
markets
are
for
that
growth
to
the
largest
extent
in
relative
as
well
as
absolute
terms
of
growth
in
Asia-Pacific.
However,
I
do
not
want
to
indicate
something
that
we
only
invest
in
Asia
Pacific
or
give
you
a
share
because
it
is
way
too
early
to
talk
about
specific
investments.
But
that
is
just
a
general
order
of
magnitude
to,
to
give
you
some
indication.
Asia
Pacific
is
the
market
to
be.
We
also
see
a
good
growth
for
those
high
value
products
in
the
United
States,
as
well
as
in
Europe.
M
Markus Mayer
Analyst, Baader Bank AG
And
regarding
the
ramp-up
pace,
so
basically
this
230,000
tons,
should
we expect
in
a
linear
trend
for
a
ramp
up?
M
Markus Steilemann
Yeah,
difficult
to
say,
because
we
really
look
into
individual
markets
and
there
we
go
for
local
permits,
we
need
to
see
where is
the
exact
place
where
we
do
that,
and
we
also
did
just
finish
one
line
in
2021
and
the
ramp-up
currently
is
happening.
That
means
specifying
with
customers,
then
fully
loading
the
plants
with
all
the
flexibility
that
those
plants
have
and
so
on
and
so
forth.
So,
I
would
not
expect
a
linear
ramp
up,
but
it's
more
like
bits
and
pieces
of
smaller
and
larger
lines,
as
we
call
it,
for
extrusion.
I
mean,
that's
the
name
of
the
technology
how
you
do
it.
That
compounding
is
basically
extrusion
process.
And
therefore
there
might
be
a
year 5,000
tons,
then
there
might
be
20,000 tons
and
there
might
be
another
6,000
tons.
So
it's
really
a
big
network
of
smaller
plants
here
and
there
at
sites
that
are
close
to
customers
within
an
already
existing
site.
And
that
is
exactly
why
I
cannot
say
it
will
be
a
linear
topic.
But
once
again,
as
a
reminder,
that
is
not
additional
capacity
in
terms
of
polycarbonate
capacity.
It's
just
that
we
take
more
of
our
own
production
of
standard
polycarbonate
and
route
it
through
the
additional
capacity
of
highly
specialized
polycarbonate.
So,
no
additional
overall
capacity,
we
are
just
moving,
let's
say,
from
highly
cyclical
standard polycarbonates
now
to
the
value
adding
products
in
our
portfolio
to
achieve,
let's
say,
80%
of
our
portfolio
by
2025
to
be
in
that,
let's
say,
space.
M
Markus Mayer
Analyst, Baader Bank AG
Okay.
Thank
you
for
this
clarification
and
the answers.
Operator
Mr. Köhler,
there
are
no
further
questions
at
this
time.
Please
continue
with
any
points
you
wish
to
raise.
R
Ronald Köhler
Head-Investor Relations, Covestro AG
Thank
you
all
for
your
interesting
question
and
for
your interest
in
Covestro.
I
think
we
are
already
slightly
overdue
on
time,
so,
happy
to
close
it
right
now.
If
you
have
any
additional
questions,
just
come
back
to
the
IR
team.
Thanks.
Bye.
Operator
Ladies
and
gentlemen,
this
concludes
the
Covestro
earnings
call.
Thank
you
for
participating.
You
may
now
disconnect.
The conference is now being recorded. Ladies and gentlemen, thank you for standing by. Welcome to the Covestro earnings call on the first quarter and full year 2021 results. The company is represented by Markus Steilemann, CEO, Thomas Toepfer, CFO, and Ronald Köhler, Investor Relations. During the presentation, all participants will be in a listen-only mode. The presentation will be followed by a question and answer session. [Operator Instructions]
I would now like to turn the conference over to Ronald Köhler. Please go ahead, sir.
Yeah. Good afternoon to all European participations and good morning to all Americans. I'm happy that you're joining our full-year 2021 conference call, and I know it's a busy day and it might be one of the several conference calls you have, therefore, I'm even more happy that you're here. We have posted the Annual Report and the earnings call presentation at our IR website, and if you haven't seen it, you can always download it. And there you will also find our Safe Harbor statement and I assume you have read it. And with that, I'll turn it over to Markus.
Thanks a lot, Ron and very good afternoon and/or good morning to everybody on the call.
In the full-year 2021, our earnings performance was well above previous year levels, as the 2020 results, as you're well aware, were heavily impacted by the coronavirus pandemic. The demand rebound resulted in a 10% core volume growth in last year, and earnings remained on high levels throughout the entire year 2021. We delivered €3.1 billion EBITDA and a free operating cash flow of €1.4 billion, and I think that qualifies 2021 as a strong financial year for Covestro.
We want our shareholders to participate in our financial success and therefore yesterday we announced a new share buyback program of €500 million over the next two years. We also continue our ambition to pay out an attractive dividend and propose a dividend of €3.40 per share.
How do our 2021 results compare to our past promises? Let's turn to the next page.
We achieved all our financial targets set for the year 2021. As I said, core volume growth of 10% included the volumes from the acquired RFM business and came in at the lower end of the guided range. We also saw strong demand and also limited product availability accompanied us in our customers throughout – and our customers throughout the year. Free operating cash flow of exactly €1.429 billion came in at the lower end of the latest guided range, yet above the upper end of the initial range.
While earnings and cash flow outlook improved in due course of the year, cash was increasingly absorbed by working capital, reflecting the outstanding price inflation, especially during the second half. We generated €3.85 billion of EBITDA and 19.5% return on capital employed, well above our initial guidance and close to the center of the latest guidance corridors.
While delivering on target on the financial side, I'm excited to announce today new targets on the non-financial climate-related side. Covestro has a tradition and a track record of pioneering sustainability in the polymer industry. I'm convinced, shareholders of Covestro will also in future benefit from both leadership in sustainability and profitable growth. Let's take a look at our new targets in more detail.
Covestro aims for climate neutrality and has set for itself a bold and ambitious target. Net zero for Scope 1 and Scope 2 greenhouse gas emissions by 2035. This target is another major milestone toward our corporate vision of becoming fully circular. As a key milestone, we plan to cut greenhouse gas emissions from our own production, referred to as Scope 1, and from external energy sources referred to as Scope 2, by 60% by 2030. A key aspect for our 2035 reduction target is meeting the goal of the Paris Climate Agreement, under which the world community aims to limit global warming to 1.5 degrees Celsius.
Sustainability, and more specifically, climate-related targets are not new to Covestro. As a matter of fact, in 2021 we achieved our previous specific greenhouse gas emission reduction target for 2025 ahead of time. We more than halved specific emissions, again, Scope 1 and Scope 2 compared to the base year 2005, while production volume doubled. As a consequence, Covestro achieved climate-neutral growth since 2005.
Reducing our own emissions, however, will not be the end. We plan to further reduce indirect greenhouse gas emissions from upstream and downstream processes in the value chain referred to as [indiscernible] (00:06:06). This part of the transformation will be largely linked to our transition to a circular economy.
More importantly, we strongly believe that transition opportunities will outweigh transition costs. We aim to shift all our production processes and products completely to circular principles in the long-term and we intend to support meeting our and customers' climate objectives at the same time. Covestro is continuously expanding its portfolio of climate-neutral products as customers already today demand sustainable products and, we believe, are also willing to pay for the added value. This is vital to align our transition to net zero emissions with profitable growth prospects.
To achieve net zero emissions, Covestro anticipates dedicated investments of accumulated €250 million to €600 million by 2030. These investments will tackle our direct greenhouse gas emissions, but also increase our overall energy efficiency. This is expected to result in low operating expenses of between €50 million and €100 million annually during the same time.
We currently also expect an increase in operating expenses in the magnitude of a low three-digit million euro amount annually. These cost assumptions, based on historic circumstance that prices for fossil-derived energies are lower than prices for renewable energies. The upside here is that this historic price order is being turned around, as it can be observed in many places today.
If we now turn to the next page, we have identified three main levers that make a vital contribution to achieving our climate targets: more sustainable manufacturing, renewable electricity, and renewable steam. The waterfall graph on the chart shows our detailed path and expected contribution of each of the measures to reach our interim target of 60%, emission reductions in 2030 and a 100% reduction in 2035. It is needless to say that business growth without any climate-related measures leads to higher emissions, in our case, plus 1 million metric tons until 2030.
Thereafter, we expect no negative impact on emissions from business growth as future growth investments are required to support climate neutral growth from 2030 onwards. Also, there are external factors that influence our Scope 1 and Scope 2 emissions. These factors comprise the energy mix of [indiscernible] (00:08:58), for example, the announced nuclear exit in Germany and Belgium, as well as public energy allocation schemes, for example, determined by the German renewable energy's law, short, EEG. The net effect of all changes as known today amounts to minus 0.7 million metric tons.
To look at the identified lighthouse projects from the area of manufacturing excellence and renewable energy, let's turn to the next page, number 7. We have identified numerous measures to effectively reduce our greenhouse gas emissions. In the area of more sustainable manufacturing, production processes will be further improved and energy-efficiency enhanced. One focus is to reduce nitrous oxide emissions by installing highly efficient catalysts. Secondly, in the area of renewable electricity, our production sites worldwide will be gradually converted from fossil based to renewable electricity.
We have already entered a number of power purchase agreements for renewable energy and further agreements are being planned.
Thirdly, steam. This is an important energy source for chemical production processes. Converting steam generation from fossil to renewable energy sources is a challenge that Covestro intends to solve by various routes. Those routes are ranging from electrifying steam generation based on renewable energies to using bio gas or green hydrogen as an energy source for steam generation. In a nutshell, we are very excited to have set ourselves this bold emission targets and have worked relentlessly out our roadmap towards climate neutrality.
Covestro continues as a pioneer towards a circular economy and to successfully deliver both leadership in sustainability and profitable growth.
With this, I would like to hand over to Thomas for the financial review.
Yes, thank you, Markus and also a very warm welcome from my side to our call.
So, if you go to page 8 of the presentation, you can see our core volume growth of 10% in the financial year 2021 and that reflects the volume rebound and the consolidation of RFM. Just to remind you, RFM contributed 6 percentage points, but I would also like to remind you that at the same time, we were constrained by product availability, and you can see the volume development by our key industries in the box on the right hand side in the order of kilotons sold.
So, first of all, wood and furniture came in at minus 4%. We saw solid demand, however, we were constrained in terms of TDI and polyol availability. Construction, we came – came in at plus 1% against solid demand, however, constrained and MVI and P – polycarbonate availability. And number three, the auto and transportation industry, plus 10%, so, very strong year-on-year growth globally and I would like to remind you that the global auto industry grew by only 2% year-on-year. So we outgrew the industry by 8 percentage points. And that, for me, is another indication that we are delivering in the high growth part of that industry, specifically electric vehicles.
Last but not least, electro came in at plus 9% with growth in all regions. And I would like to remind you that all industries are excluding RFM and the RFM business is fully consolidated in diverse and this is why you find the plus 33% in the box on the right-hand side of the page.
So with that, let's turn to page 9 of the presentation, where you have the sales bridge. You can see full-year sales increased by 48.5% pushed by 35% higher prices, that is the €3.7 billion that you see in the bridge. And it's just another proof point that Covestro successfully passed through the unprecedented inflation of raw material prices to our customers.
The net volume effect in sales and that excludes RFM was 6.5% year-on-year, mainly driven by solutions and specialties, as this segment compared itself to a relatively weak prior year. And the volume growth, especially in Performance Materials was limited by constrained product availability as I mentioned earlier. FX is only a small negative number with minus 0.8%, mainly driven by the weak US dollar. And I would like to draw your attention to the portfolio bucket, which is the €863 million that isn't essentially the entire sales of RFM, which have been consolidated as of April 1. And that's an 8.1% and 8.1% effect for the full year, if you put it to the Covestro numbers.
So with that, let us turn to the EBITDA bridge on page 10. You can see that the full-year EBITDA doubled compared to prior year, driven by the highly positive pricing delta. And that is the 1.866 billion, and the vast majority of that was contributed by all key product groups within Performance Materials. However, also the volume effect in EBITDA contributed positively with an attractive volume leverage of 49% and FX was virtually neutral on a year-on-year basis.
So I would just like to comment on the other items bucket, which includes essentially three main effects. First of all, there is a negative €443 million in there, and that is the impact from the higher bonus provisions for variable compensation. Secondly, there's a negative €60 million one-time effect, which is related to the acquired RFM business, and that compares to a negative €33 million in 2020. And number three, there's a negative €39 million one-time effect included in that bucket, which is related to the LEAP transformation program, and we had no such effect in 2020.
So with that, let us go to page 11, which shows you the free operating cash flow, and as Markus said earlier, we generated a free operating cash flow of €1.4 billion, which is a strong number, well above previous year, and we achieved this despite the significant higher working capital. You can see in the bullet on the right-hand side that in Q4, the free operating cash flow was somewhat below previous year as the positive contributions from working capital and the higher earnings were eaten up by significantly higher income taxes paid and also higher CapEx.
And talking about working capital that ratio in terms of working capital to sales ratio stood at 18.6%, so it's just slightly above the 18.2%, which we had a year earlier. And again, that reflects higher feedstock and also product prices, which push up the euro values, especially of our inventories. You can also see in the table below the graph that we spent €764 million on CapEx, so slightly below the budget number of €800 million. That is due to two effects; one is some projects were shifted into 2022, but also some projects came in at a lower spend than we had expected, so that is a positive news in terms of CapEx. And you can also see that year-on-year we spend a much higher number on income tax paid, but that reflects our cash tax rate of 25%, absolutely within the guidance range and also below the P&L tax rate of 25.9%.
My last comment is the last item in the little table: the other effects. That, of course, reflects the higher provisions for variable compensation because the cash out for the bonus will only occur in the second quarter of 2022.
So with that, let us turn to the balance sheet on page 12. I can truly make the statement that our balance sheet remains strong. Our pension provisions decreased by €924 million. That is due partly to the higher discount rate specifically in Germany. But the other reason is that we transferred €500 million of funds in one of our pension trusts and the effect you can see it's essentially shown twice in the bridge, one time on the financial debt side and the other time on the pension provision reduction side.
In terms of the balance sheet ratios, you can see that the ratios are strong, so the ratio of total net debt to EBITDA stands at 0.8 times at the year end of 2021 versus 1.7 times the year before. And essentially, you can also see that after €1.5 billion cash outflow for RFM and the €0.5 billion euro bond repayment and also the €0.5 billion fund transfer, we still have €1.1 billion available in cash, cash equivalents and also current financial assets.
So with that, I would like to hand it back to Markus for the segment review.
Yeah. Thanks a lot, Thomas. And please allow me to begin with the full-year review of our Performance Materials segment. The segment delivered a highly positive pricing data in 2021. We were able to pass through increasingly higher feedstock as well as energy prices, and on top, expanded our margin. First and foremost, this performance was based on solid underlying demand. However, simultaneously, our growth potential was limited by a continued constrained product availability.
Looking forward into full-year 2022, we expect our sales volumes to grow strongly based on improving product availability. At the same time, we expect the segment EBITDA to significantly decrease year-on-year due to intensified competition, mainly in polycarbonates, and I will talk a bit more about polycarbonates in a short moment. Positively, we anticipate that the supply/demand balance for our product groups, MDI and TDI will further improve as announced supply additions are below expected demand growth.
Let's turn to the next page. So turning to Solutions & Specialties, we defended absolute EBITDA and managed earnings to remain virtually unchanged year-on-year despite unprecedented inflation. Positively, the segment recorded strong sales volume growth of 12% year-on-year, reflecting a rebound in demand from a pandemic-impacted prior year. The acquired RFM business, consolidated since April 2, 2021, also contributed positively.
EBITDA margin, however, was down year-on-year by nearly 5 percentage points. This is due to mainly three reasons: significantly, higher price-driven sales comparing to unchanged absolute EBITDA resulting in a mathematically lower margin; earnings significantly burdened by higher [indiscernible] (00:20:16) prices and longer-term sales contracts, yet prevented to fully pass through prices, reflecting the typical nature of a specialty business.
Looking forward into 2022, we expect sales volumes to continue strong growth versus 2021, and we also expect segment EBITDA to significantly increase year-on-year. How we anticipate to reach our segment margin target of 17% is what I will present to you on the next page. As just presented, the unsatisfactory 2021 margin of 9.9% as a reference point to target a segment EBITDA margin of 17% in 2024. In order to reach 17%, our EBITDA margin will be driven by the four key elements that are shown in light orange on the chart.
Firstly, continued execution of our lead transformation and cost containment program, as well as continued strong growth are expected to further dilute fixed costs. Secondly, we are going to further progress with the RFM integration and realize the anticipated synergies. Thirdly, we will focus on value-based pricing, especially for newly launched innovative products. Lastly, the margin target is based on mid-cycle intersection charges by Performance Materials, therefore, are anticipated to be lower than in 2021.
In 2022, as already mentioned, we expect a significant increase in EBITDA. On the following two charts, I'm going to share some further details on our targeted path of margin improvement, beginning with RFM. So let's turn to the next page.
Regarding the integration of the acquired RFM business's all planned synergies are fully confirmed and realization is ahead of plan. As a recap, at the time of acquisition, we identified a total EBITDA contribution from synergies of €120 million, or about 12% of RFM full-year sales, thereof, €80 million synergies from lower costs and €40 million from additional revenues. We could pull forward the realization of [ph] these (00:22:33) and delivered €26 million in 2021, compared to originally expected €10 million in the same year.
We achieved this above-plan realization at €6 million lower cost compared to earlier planning, and we now expect total implementation cost of €150 million, €40 million less than we originally expected. The main reason this lower-than-expected severance needs. In a nutshell, the integration of the acquired RFM business about one-and-half years after the announcement is a success and we are satisfied with the delivered results.
Let's now turn pages to polycarbonate. As a second deep dive, let me elaborate a little bit more on our polycarbonate strategy. Overall, we continue the strategic portfolio shift from standard polycarbonate to different polycarbonates. I myself accelerated this shift from 2013 onwards when I headed the former business unit polycarbonates.
The graph on the left side shows the development of the volume split, while the grey bars continuously shrink, depicting the standard polycarbonate business within our Performance Materials segment, the light pink bars continuously rise, depicting a differentiated polycarbonate business. Refining standard polycarbonate resins produced at our fully integrated large-scale [indiscernible] (00:24:00) plants within Performance Materials into differentiated grades. That is the job of the business entity engineering plastics within the Solutions & Specialties segment.
In order to allow this shift, we are continuously investing in downstream capacity referred to as polycarbonate compounding between 2020 and 2025. We will add 230,000 tonnes of additional compounding capacity. Importantly to note is this addition is neutral to the overall industry supply-demand balance yet it exclusively allows Covestro to cater even more for the attractive, differentiated customer segments of this industry. This portfolio shift is supported by the expected 7% industry demand CAGR for engineering plastics across several customer industries. A detailed list of growth drivers is shown on the right side of this chart.
With that, allow me to turn to the next page. Looking at into 2022, we export expect solid demand recovery to continue globally. This applies to the products we just talked about in more detail, but also to our entire product portfolio. The figures on this chart show full-year demand estimates for our key industries and respective important industries. The expected 2022 demand growth in global automotive and global construction shows growth estimates above the full year 2021 values. The recovery in those industries is expected to continue after the strong demand hit by the coronavirus pandemic in 2020.
The expected 2022 demand growth in global furniture and global electro in contrast show values below full year to 2021 but on continued attractive levels. Key reason is the strong demand recoveries seen in these industries already in last year. Now, I would like to hand over to Thomas.
Yes, thank you. And I'm on page 19 of the presentation where we talk about our fixed cost development. So, remember last year, we committed to keep our fixed costs unchanged until 2023 relative to the 2020 level. And it's fair to say that we qualified this target as being challenging from the beginning. Now, if you look at the chart, you can see that in financial year 2021, the cost development was in line with the expectation and our guidance. So, we saw a rebound from the 2020, which, at the time, was marked by the lockdown and short-term cost savings. And the rebound was absolutely in line with our guidance and expectation, as I said.
So, also in 2022 and 2023 we do continue to execute cost reductions of between $50 million and $100 million per year through the LEAP program, and I can tell you that all the costs that we can control are on track. However, we also see now, of course, is that there are counter effects resulting from high inflation, for example, logistics and labor cost, and also potential projects that we will decide like the MDI project. And last but not least, also the new climate-related investments that are necessary in order to reduce our greenhouse gas emissions, as Marcus just elaborated on. So, as the graph indicates, with that we will have to face some counter effects in the years 2022 and 2023, but we remain fully committed to tightly manage our fixed cost.
And just one example of that, counter effect, you find on page 20, because I think just shows you this unprecedented challenge with the global energy costs more than doubling within two years. So as you can see, the global energy costs are significantly increasing in 2021, mainly driven by the European energy prices. And you can see this in the blue columns in the upper part of the chart. So global energy costs for Covestro in 2021 where €1 billion and thereof €0.6 billion were driven by electricity and €0.4 billion were driven by natural gas. And if you break that down on a region-by-region basis, I can tell you that 70% of that is in the EU, 20% is in Asia and 10% is in the United States.
So the lower part of the chart depicts, by some key countries, the specific price development for electricity and natural gas. And you can see, first of all, the significant increases, but also the regional differences. So that based on our actual breakdown, our global energy bill in 2022 is expected to be at €1.5 billion. And again, you see this in the light blue bar on the upper half of the chart.
So, if we put it all together and you go to page 21, we are expecting an EBITDA in 2022 again about the mid-cycle earnings level. The mark-to-market estimate stands at about €3.3 billion based on the January data. And that is above the upper end of our EBITDA guidance corridor. And that EBITDA guidance is €2.5 billion to €3 billion, reflecting expectations on an increase in competitive pressure during the course of 2022.
I would also like to say that the mid-cycle EBITDA level, we now see that €2.5 billion after a step up compared to 2021 which is attributable to the RFM acquisition and the mid-cycle EBITDA should increase to €2.8 billion until 2024, driven by the business growth and of course, also the realization of the RFM synergies. So, what I would also say is that based on the industry supply and demand forecast that we see for the next years, the EBITDA is expected to remain above the mid-cycle levels for the next years.
And with that, I would like to come to the concrete outlook for 2022 on page 22 and as you can see, it contains two new KPIs. So first of all, EBITDA is replacing core volume growth, and that reflects our ongoing way from volume growth towards value-driven growth. And secondly, there is an ESG KPI measuring the greenhouse gas emission measured in metric million tons for absolute CO2 equivalents in Scope 1 and Scope 2. The free operating cash flow outlook is in line with our EBITDA outlook, as I explained a minute ago, and the number stands at €1 billion to €1.5 billion.
And in terms of ROCE above WACC, the outlook is between – the outlook is that we have the WACC of 7 percentage points in 2022 after 6.6% in 2021, and we expect an over achievement so ROCE over WACC between 5 percentage points and 9 percentage points. Greenhouse gas emissions we expect between 5.6 million and 6.1 million metric tons. And the increase is mainly attributable firstly to the composition of the externally procured power, which is less favorable for us and secondly to the growth of the business. And last but not least, I would like to mention our guidance for the EBITDA in Q1. So, we're expecting between €750 million and €850 million and even with the lower end of this guidance range, we would be above the previous year level of €743 million.
So let's turn to the next page, which shows our CapEx development so unchanged and we end with the highest priority is the investment into profitable organic growth because we do think that we are delivering attractive returns based on our industry and cost leadership. So for 2022, we have expected total planned CapEx of €1 billion and that includes €0.6 billion expansion CapEx and €400 million of maintenance CapEx. And this planned year-on-year step up, especially in expansion CapEx, includes our single largest CapEx project, which is currently our aniline expansion in Antwerp in Belgium. And of course, we will continue to maintain an adequate level of maintenance CapEx to secure, safe and reliable and efficient operations.
So with that, let me come to the topic of the dividend on page 24, we're proposing €3.40 per share. That is the highest dividend in the Covestro history. We had communicated our new payout corridor between 35% and 55%. We said that in strong years, we would probably be in the lower half of the corridor and in weaker years in the upper half of the corridor. And as we consider 2021 to be a strong but not a peak year, the payout ratio of 41% is pretty much in the middle of the lower half. So that explains the context. And of course, the upcoming AGM on April 21 should then ratify the proposal that we're making.
So on the next page, you can see the details on the share buyback program, which we announced yesterday, we announced to buy back shares of €500 million over the next two years €500 million over the next two years. And we do see a share buyback as an additional option to create value for our shareholders because it optimizes the capital structure for the group and of course it increases the earnings and the dividend per share. And with this decision, I would like to reiterate and explain also, and you can see this in the right hand side in the box, our priorities in terms of capital allocation. So, what is unchanged, our number one priority is profitable growth through capital expenditures, and I was talking about the CapEx spending for next year on one of the previous pages.
Secondly, we do want to maintain an attractive dividend payout. And I think the proposal that we're making for 2021 is underlining that. However, what we currently see is that large acquisitions currently for us have a lower priority. This is also driven by the fact that we see that the multiples that are currently paid in the market make it very difficult for us to find value creating M&A activities for us, at least on the larger scale. And you know that we are very much value driven and selective here. And, therefore, as I said, the priority for large acquisitions currently is lower. And that then leads me to a share buyback because we do think that currently the investment into our own shares is a very attractive investment opportunity that we have. And just to conclude it, of course, we do remain committed to a solid investment grade rating.
And with that, I would like to hand it back to Markus.
Yeah. Thanks a lot, Thomas. And before we now entered into the Q&A session, please allow me to quickly summarize. Our EBIDTA increase in full year 2021 was driven by positive pricing data, and we were able of passing through the unprecedented raw material inflation. Secondly, we plan to – we suggest to the annual general meeting a record dividend of €3.40 per share for full year 2021, with a dividend yield of 6.3% based on year-end share price. Thomas just alluded to a share buyback program of €0.5 billion that has been launched using the opportunity to create value for our shareholders.
The full year 2022 earnings outlook is again above mid-levels based on solid sales growth and a strong start into the first quarter of 2022. And we also announced our climate neutrality in 2035 ambitions after as an important intermediate milestone a 60% reduction of greenhouse gas emissions referring to Scope 1 and Scope 2 in 2030. So all in, looking ahead means expecting profitable growth into a climate-neutral future.
Thanks a lot. And now we're looking very much forward to your questions, and I'm handing back to the operator. Thanks a lot.
Thank you. Ladies and gentlemen, at this time, we'll begin the question-and-answer session. [Operator Instructions] Okay. And the first question for today comes from Mr. Christian Faitz, who's calling from Kepler Cheuvreux. Over to you.
Yes. Good afternoon, everybody. Good afternoon Markus, Thomas and Ronald. Two questions if I may, first one, I know your sales exposure into Russia and Ukraine is rather limited. Yet looking at some of your major customer sales exposures in these regions, I am thinking of IKEA in furniture or Henkel in adhesives. Would you see those sales into these major customers being impacted? And can you give us an idea of how impacted those would be? And then, second question, your – is it still your plan to come to a decision where to build the new MDI plant by the middle of this year? Thank you.
Yeah. Christian, great to hear from you, and let me answer the following way. For sure, we're looking into individual customers that have exposure to Russia, and for sure, we are also looking, let's say, into specific industries that have exposure into Russia. But currently it is way too early to speculate or start speculating about how that from a macro perspective and also from an overall industry perspective, would impact our own sales because there's so many influencing factors that it is really currently difficult to predict.
One thing that I would like to make sure is that we understand we have numerous assumptions from a macro perspective, but also numerous assumptions from individual industry perspectives. And so, if some of those aspects are maybe not exactly in the order of magnitude, as we currently expected today, we do see very limited to maybe even no impact on our, for example, current guidance for the year. For sure, if there would be massive influence, for example, global GDP would go massively down, maybe even half or even go [indiscernible] (00:39:17) that would have an impact, but it is way too early to say that. And that's why we're also factoring in what we currently can see, and that is also what you see reflected in the current guidance. So I hope that answers the first part of your questions.
And in that context, you also have to see that Russia is only representing 2% of global GDP. Therefore, a spillover, let's say, effect should be, at least from today's perspective, limited. I know that there's different scenarios out there, but we're closely monitoring the situation. And but today, honestly speaking, this is the position we have, and this is also what we today can say to this. On MDI, we have always been clear that we will come to a decision end of third quarter beginning of fourth quarter. So that means after the summer holiday, you will hear more about that.
Thanks, Markus. Thank you very much.
Thanks, Christian.
The next question comes from Mubasher Chaudhry, he's calling from Citi. Over to you.
Hi. Thank you for taking my questions. First one is on the guidance. Can you please talk about some of the moving parts which get you from the bottom end of the guidance at €2.5 billion to €3 billion range from [indiscernible] (00:40:42) And then second one on industry utilizations. Could you provide some thoughts on the MDI, TDI utilizations in 2021 and where do you see them going for 2022? Thank you.
Yeah, so this is Thomas. The sound quality was a little bit poor. So I'm trying to answer the first question if it's not spot on, please let me know and then I will try to repeat it.
Thank you.
So what I understood your question, what is the – what would bring us to the bottom end and the top end of the guidance? So, I think there are two major factors. One is you should, of course, know that we are assuming a growth factor for 2022. So a mid-to-high single digit number growth. That is factoring in the assumption that we will have lower unplanned shutdowns than we had in 2021 and that we will simply have a higher uptime for our own plants.
And secondly on the negative side, it is assuming essentially a negative pricing delta of $1 billion because we do see that there is, especially in Asia, new capacities for polycarbonates coming to the market, and we already are now seeing some pricing pressure on for polycarbonate in that region. So, now how exactly that will play out is, of course, the big question. But, therefore, the lower end of the guidance simply assumes that we will again have some unplanned shutdowns and, therefore, not deliver the full growth potential.
So, rather in the mid-single digit range and the other factor and every percentage point of growth is some €80 million of EBITDA, just to give you the order of magnitude. And the other, of course, is the pricing delta. We do think that $1 billion is a reasonable number and you can see that the pricing – the mark to market today stands at 3.3%, so that also shows you the order of magnitude that we've factored in. But, of course, things can move quickly. However, I would also like to be a little bit more [indiscernible] (00:42:47) we currently do see that Q1 is on a very good track and the fact that we're guiding between $750 million to $850 million, so above the previous year is maybe proof-point to that.
So, I think those are the factors, the swing factors between the lower and the upper end of the guidance for EBITDA.
Yeah. And thanks, Thomas, also here if you would like to have a bit more flavor on the individual product groups, MDI, TDI, polycarbonate, as well as our standard polyols; let's take a look at MDI first. So we actually assume that based on nameplate capacity, last year, we had an industry utilization of around 90% for the full year. And we expect given the continued demand, but also the continued, let's say, supply additions that we see that we should move above 90% in full year 2022, the maybe well-known one ramp-up last year and early 2021 expansion should be more or less already being absorbed by the market. And then, at the same time, I believe that we're currently in a situation where things can turn north and south. That means we're in a situation where we have a balanced MDI market, but I would lean currently more towards, let's say, a market that would change to be a little bit undersupplied, if there's no, let's say, major disruptions happening in one or the other direction.
On TDI margins, it's slightly a different story because nameplate capacity, we are operating at rates and full year 2021 at around 73%. That would indicate that there would have been little pricing power, but we have seen actually the opposite in the overall market. And also given that the available capacity based on planned or unplanned shutdowns is actually much lower than the nameplate capacity also expected overall structurally, the situation improves, but we also may benefit a little bit, let's say, from this current, let's say, lack of availability of some TDI plants around the world.
So long story short, if you look at the overall [ph] long-term (00:45:00) development, the announcement until 2026, the supply growth and on the other hand, demand growth in TDI, we expect that we will see a further improving industry utilization rate and especially in 2022 and 2023, the announced capacity additions would only sum up to 1% by the year – each year. So that also gives you flavor on TDI. Standard polyols and the really relevant markets for Covestro, which is Europe and North America, you could see that the – let's say industry margin levels are assumed to be extraordinarily high. That means more than twice as high as historic average. And the reason for that, let's say, margin peak was that we had several production limitations [indiscernible] (00:45:51) of larger producers, and I'm not going down the entire list now.
We're seeing a recovery of the supply in Europe and North America, and that would indicate further margin normalization during that year. That might be on the other hand, potentially cushioned by planned turnarounds in the second quarter by, for example, Dow and Shell in Europe, but also Lyondell (sic) [LyondellBasell] (00:46:11) and Dow in North America. So overall, we have seen that in China already decline – there is some margin decline happened to more normal levels and with the rest of Asia Pacific to follow. And it remains to be seen how that spillover effect will look like for Europe and US, because currently that is limited, particularly by the increased – significantly increased supply chain costs that we talked already about in a different context and reliability of the essence.
So last point, and Thomas has alluded to that already quite a bit on the polycarbonate and here I'm particularly referring to the commodity part. Yeah, in our performance materials segment, so the standard polycarbonate types, we assume that we will see a further decline of the nameplate capacity utilization from 69% last year to around 65% in the full year 2022. And we also see that there's additional capacity until 2026 coming in. So we have a supply growth of 5% to 6%, which is above average annual demand growth of 4%. That would also then indicate that it would lead to a further decline in industrialization rates.
So long story short, supply additions expected to peak this year and so on and so forth. Long-term supply growth is expected to further decline. Nonetheless, we are in a, let's say, rather challenging situation with regard to standard polycarbonates. However, and I think we have made that very clear, we are moving away from the commodity and standard polycarbonate for Covestro, the volume share of standard polycarbonates now in the segment Performance Materials versus the total polycarbonates, declined from 65% in 2010 to only 32% in 2020 and we're expecting 27 – sorry, we saw 27% in 2021, and we expect that share to further declining to 25% to 20%.
And that shows you very clearly that our exposure to that segment is decreasing by the day and our exposure to the high value segment is, let's say, increasing by the day. And that should give you also some comfort about how we are cushioning this. Nonetheless, Thomas has alluded to that what that overall could mean for all four product routes in terms of, let's say, pricing effect in 2022. It was a long answer. However, I think it's important to get the full picture so that you have a better flavor how to look at our guidance and also the year ahead.
Very thorough. Thank you very much.
The next question comes from Geoff Haire, who's calling from UBS. Please go ahead.
Oh, good afternoon and thank you for the presentation and the opportunity to ask some questions. I have two related to energy. So if I look at slide 20, if I'm reading that right, I think you're saying that there's a €500 million increase in the energy bill in 2020. But if I look on a mark-to-market basis that the graphs and information we can see, it would imply that this could be significantly higher than €500 million. So is there offsets with hedging or long-term energy pricing contracts that you have, wondering if you could discuss that? And then also connected with this, do you expect energy costs to continue to be high relative to where we were last year in 2023 or do you assume some normalization?
Well, Geoff, this is Thomas. Your last question certainly is the $100 million question. So let me start with the first one – exactly. The numbers in the light blue columns that you see is, yes, we had €0.6 billion energy costs in 2020, €1 billion last year. And we were expecting €1.5 billion for 2022 in our plans. If you mark that to market with yesterday's levels, you're right it would be slightly higher, roughly €1.7 billion. But, again, I would say in the overall context, we have shown that we were able to pass through energy cost rises quite successfully in 2021, and therefore, this daily mark-to-market, which really has quite an amplitude over the last number of days, would not lead us to change our guidance. But you're right, the €1.5 million would be €1.7 million as of yesterday.
What are we expecting for 2023, it's really more the volatility, which is a challenge and not the absolute level, because you've seen this specifically in our Solutions & Specialty segment, where we are somewhat slow to adjust contracts to price changes, simply because they are longer running. However, if it is a longer plateau on a high level, our view is that also the Solutions & Specialty segment should be able to pass this onto the customers. And therefore, as I said, we're not so much concerned with the absolute level, but more with the volatility in the energy prices.
Okay. I'll just ask a quick follow-up. Within your sort of multi-year contracts that you have for MDI or polycarbonate, do you have energy pass-through clauses on those?
Yeah. Essentially, we do not have longer-term contracts for MDI and TDI. So those are one-month rolling contracts, if you like. I mean, there might be a frame contract with the minimum and maximum quantities, but the prices are essentially adjusted on a monthly level, and therefore, there is no automatism. So there is not an automatic price adjustment clause, but there is a monthly renegotiation of the prices, which is the standard in the industry.
Okay. Thanks.
The next question comes from Thomas Swoboda, who's calling from Société Générale. Please go ahead.
Yes. Good afternoon, everybody. I have two questions left, please. Firstly, on CapEx, can you give us a sneak preview on the next couple of years in the light of the investment in sustainability and the MDI plant, wherever it would be built? So when do you see the peak? What is the peak CapEx roughly whatever you can say?
And the second question is on your emission targets, an important driver is the renewable energy. My question is how much of this renewable energy you have in your planning? You are going to acquire yourself, meaning, how much is under your control and how much do you rely that basically the governments will provide enough green energy, so you can reach your targets? Thank you.
Yeah, Thomas, this is Thomas. Let me take the first question on CapEx. And of course, I mean, the sneak preview is somewhat dependent on the decision that we take after the summer break, as Markus said. But let's assume just for a minute that we were to decide to build MDI irrespective of which region it is, then I think you should expect another step-up in 2023 of between €100 million and €200 million. And you should expect the peak to occur roughly in 2025, with up to €1.5 billion for work.
You also put this in context with our investment for carbon-neutrality. We said that we would spend €1 billion over the next 10 years. I think that just shows you the absolute CapEx number that we need to achieve. The target is not the big swing factor here; simply because we have not stranded assets. We can fully operate our assets as they are with drop-in solutions, so renewable input factors. We have to switch the energy to green energy supply. We have to switch them to green steam. But we don't have to invest big ticket items for completely new installations because, as I said, the ones that we have do work with drop-in solutions and are not stranded assets. And I think that just puts into context that the ticket for our carbon neutrality path is not the big swing factor in our CapEx planning
Yeah, and Thomas, if I may say so – it is Markus speaking. That plan has as Thomas alluded three big ticket items not in terms of costs but where we want to focus on in terms of levers, how to make our Scope 1 and Scope 2 emissions climate-neutral by 2030. Part of it is for sure that we have expectations on how the overall electricity, let's say, production will look like in a specific country. However, we're not entirely or even, to a large extent, relying on that.
And proof of that is, for example, how we have so far managed that. We actually closed a big deal at that time, the largest ever made, let's say, private deal between two companies on renewable energy, which [technical difficulty] (00:55:59) where we expect about 10% of the electric demand of our production facilities by 2025 being, let's say, supported by a wind farm of Ørsted in the North Sea. We have actually done a similar deal with the company ENGIE for our production plant in Antwerp, covering already since last year, April 1, 45% of the electrical energy demand. And we have now actually sun-powered electricity that covers around 10% of the electrical demand of our [ph] charging sites (00:56:30).
So you see that regardless of what the state is doing and how the state grid energy mix looks like, we are also pursuing own options to buy our own electricity to make sure that we achieve that target. And we will for sure adopt this depending on how, let's say, the overall development will look like. So that flexibility is built in for sure. At one point in time, you have to jump and you have to make a decision. For example, the Ørsted contract was actually signed in 2019. It takes six years to build a wind park, and therefore, at one point in time, we have to say no matter what the state does, we secure our own energy.
But on the other hand, that is not different from what we are currently doing, let's say, with fossil-based energy also here, we have own supply agreements with individual companies. And also here we already had the chance to say how much green electricity we want to have and so on and so forth. So long story short, that is not carved in stone, and it is not relying, let's say, on individual governmental decisions, but rather a flexible approach that we have within the three major levers that we have described in the presentation.
Very clear. Thank you, both.
Thank you. The next question comes from Matthew Yates calling from Bank of America. Please go ahead.
Hi. Good afternoon. A couple of questions, please. Just to clarify on the mark-to-market calculation, are you assuming mid-to-high single-digit volume growth within that math? That's the first question.
The second question to Markus, maybe going back to slide 17, on your polycarbonate mix. Thanks for the detail there. When you've talked in this call about intensified competition, can I just check, is that specifically on these more standard products? Are you also seeing competition creep into the more sophisticated areas?
And if I could ask a third one around the buyback, just out of curiosity, the decision to do this over two years rather than one year, can you just explain the thought process there? And I guess, it's not really a question of approvals but more living within the financial framework. And if that was the case, then was there any debate about adopting a sort of more modular approach over a shorter time period that you could revisit and update over time depending how things evolve? Thank you.
Yeah. Let me maybe start with the first question on the mark-to-market, so yes, that essentially takes into account the current pricing level or current margin level, I should say as of January. And if you multiply this then out with our volume assumption for 2022, so the mid- to high-single-digit growth rate that we see. So that is essentially the product that gives you then the €3.3 billion. And as I said, 1 percentage point of growth essentially translates into €80 million of EBITDA as an effect.
I could also directly cover the share buyback question. So we always said that a share buyback, we would do this in a opportunistic and anti-cyclical way. So we do feel that the two-year horizon gives us the flexibility to do exactly this. There was not a big debate because secondly, we also see this as market standard, and therefore, we do feel that both from a company but more specifically from a shareholder perspective, this is the right approach to give us the time to really act flexibly, and as I said, opportunistically with respect to the share buyback.
Yeah. And on the third question, as you alluded to, more sophisticated or the non-sophisticated part, if I assume that you mean with non-sophisticated part, the standard polycarbonates, that is where the competition is really in full swing, that is where we also expect the market to really heavily compete. And that is exactly why we long term ago already have moved away and doing that with increasing speed over the next years from that particular segment.
Nonetheless, we are very competitive in this market to be absolutely clear. We have large assets, we use high economy of scales and we continuously and particularly now in a new structure focusing on cost-leading positions in all regions with all assets where we produce to make sure that we always get the best out of, let's say, our investments here and compete as tough as possible and as dedicated as possible in that.
Do we see similar trends in the sophisticated grades? Honestly speaking, no. Why? We have some local competitors here and there who try to do the same trick that we do. But we have to consider that this is a more a technology platform approach for the sophisticated grades of polycarbonate. What do I mean with that? You have to understand how all the technologies work together, you have to have the ability to invest, you have to have the ability to have critical mass also to have this research and technology platform really having leading-edge technologies. And the newest trend here is, for example, the digitalization, simulation kicks in, with all the new calculation capacity, supercomputing, high-performance computing, even quantum computing. And by that, you could even further accelerate, let's say, your development speed towards customers with regard to that technology platform.
That makes it more and more difficult for smaller local competitors to really step in. And that means you need to have global reach, global scale and access to those technology platform levers. Otherwise, you will not be able to really compete in that market. And therefore, that is a market for the big ones, that is a market for the fast ones, and that is a market for the innovative ones. Therefore, we feel [indiscernible] (01:02:40) position in the segment no matter how competition looks like.
Okay. Thank you for taking the time.
Thank you. The next question comes from Georgina Fraser, who is calling from Goldman Sachs. Please go ahead.
Thank you and good afternoon, Markus and Thomas. Thanks for taking my questions. I have two. The first one is – just looking a bit further up the supply chain in Russia, I understand it's quite difficult to predict how demand might be impacted. But are there any key raw materials in either your own supply chains or competing chemical product supply chains that you think will be affected?
And then, my second question is, do the recent geopolitical tensions raise the importance of delivering your circularity targets? And how would you characterize the opportunities or benefits? And for a chemical company, that is switching to more diversified feedstocks?
Yeah, Georgina, thanks for the questions. While the Russian supply chain – petrochemicals are, let's say, limited in that sense, if you look at the [indiscernible] (01:03:56) prices, for example, in Europe, they just settled only slightly up. And if you look into specific raw materials that we have versus competing products, we have done so far only our own analysis and we do not see currently any short, not even in all the cases, any mid-term, let's say, physical supply risks of any of the raw materials that we need for our production.
And on the long term, we anyhow and we have stated that also in a different context, in earlier conference calls, anyhow, to – or however due to different reasons – regions – reasons, that we want to broaden our supply base to make sure that we also have here more competition with regard to our supplier base. So, long story short, we currently do not see any large effects on our own supply chains, but currently I have to say we are not yet aware of any, let's say, supply chain disruptions of immediately competing products or drop in products for our solutions. So, that analysis has not yet been performed.
On the second bit – second question, we do see a clear demand in the markets for products that are having a higher share of circular carbon, let's say, in our context. The challenge we are currently facing is that we want to build the raw material markets for circular carbon, and that is a key challenge because we would have more demand from our customer's side for those products. We are able to create value and extract value from those products, and we get by the day more and more requests from customers and consumers, whether they can have the respective products. And that's why we have very boldly moved forward on, let's say, renewable MDI, on renewable TDI, on renewable polycarbonate exactly to address those markets. The key challenges we have to grow and to develop the respective markets from a supplier side.
Just to give you a few numbers, last year, we roughly bought 20,000 tons of renewable certified respective raw materials that go into our large products. This year, we aim to roughly 70,000 tons to 100,000 tons. That would mean Sector 3 to 5. However, that still at the upper end would only represent 2.5% of the total amount of petrochemical feedstock that we're currently buying. So, long story short, we see great opportunities. We also believe in a first mover advantage to also extract value, but we also see the challenges to now rapidly scale up and we are far, I have to say far, let's say from the situation where this is a major share of our portfolio.
However, I see mid of the century that the [ph] overall (01:06:50) industry will be able to supply maybe millions of tons of renewable carbon feedstock, not necessarily for our own products, but in terms of the overall industry supply and I think also that for mid of the century, those investments will fully kick in, so that we make major progress here in that regard. But I truly believe there is a first-mover advantage and that is exactly what we currently try to establish and we'll try to also lock in business with our customers.
That's great. Thank you.
Thank you. The next question comes from Chris Counihan, who's calling from Jefferies. Please go ahead.
Thanks, guys. You've mentioned, the mid to high single digit volume growth assumptions for 2022, but I was just trying to tie it back to your 10-year growth in greenhouse gas emissions on slide 6, in which the orange bar implies average of historic growth closer to 1.5% per annum before the described abatement measures. And I note at the top end of your guidance as well, you've already potentially used or admitted at least half of that in 2022.
So, are there already some net offsets in this orange bar over the coming years or can you help me reconcile that to growth expectations on the volume side longer term?
Chris, again, the sound quality was a little bit poor, so I hope that I can answer your question correctly. If I understand correctly, your question is, how to reconcile the mid to high single digit core volume growth assumptions, especially if you compare this to the historic development. And I would say, what you have to keep in mind is, in 2022, first point, 2021 was a poor year in terms of operational uptime that we delivered for various reasons, some of them external, like the winter storm, some of them simply internal, we had a major standstill in our newly built MDI facility in Brunsbüttel. We had standstill in our facilities in Leverkusen and also in Dormagen. So, it was not a great year and we were actually operationally below the numbers in terms of call volumes of 2019 still.
So, we have – and therefore the big effect that we're expecting for 2022 and it's a Covestro-specific effect, is that those things will not reoccur, plus of course we have RFM with us for another quarter, which was not the case in 2021. And if you take those things together, together with some call volume growth that should come from GDP growth and a catch-up in automotive, and you've seen the – the double digit number that we are projecting, that brings us then to the mix number of a mid to high single digit number. So, there is quite a bit of catch-up effect in there and there is of course some support from RFM in there.
So, sorry, Thomas, I was more referring to slide 6 and mid-single digits for 2022, but then slide 6 in greenhouse gas emission growth of – I think it's one million metric tons over the next decade, and asking if there is already abatement measures within that [indiscernible] (01:10:26) on slide 6, because that would be implying average Covestro growth of 1.5% per annum, when historically core volume growth had been ahead of that.
Now, I get it. So, the – the – of course, the – the new volumes that we're growing are growing with lower CO2 emissions than the historic numbers because everything that we invest into growth will be a newer technology, Markus was mentioning things like abatement for analytics. We have the high temperature [indiscernible] (01:11:00), et cetera, et cetera. So, all the new technologies that we're building have a lower CO2 footprint, plus, of course, the majority of growth, as we have also shown in one of our early Investor Relations presentation, takes place in the Solutions & Specialty segment, which by nature has lower CO2 footprint and the upstream business.
And that, I think, is the – for you the explanation why it's not a one-to-one relationship. Sorry, if I misunderstood your question the first time.
Thank you.
Thank you. The next question comes from Markus Mayer, who's calling from Baader Bank. Please go ahead.
Good afternoon, gentlemen. Three questions from my side as well. The first one is on the RFM synergies. Have been there any specific reasons for the faster-than-expected synergies or are these synergies – or the faster synergies coming from somewhere specific, or was it just that you were conservative from the tied in all our amount of the synergy and also on the cost? That would be my first question.
And directly to that, Markus, I mean, first of all, all the operational synergies came in exactly as expected. Where we were faster than expected is the cancellation of the service agreements that we still have with DCM for transitionary period and we were able to take over those services in terms of IT, accounting, controlling and some other administrative functions earlier than what we had put in our plans and that led to the overachievement. However, that is not to say, to be very clear, that the more operational things in terms of head count consolidation and also sales synergies through the joint formation of laboratories and research programs is not on track. It's also on track, but the overachievement specifically in 2021 came through the early cancellation of transitionary service agreements, mainly with DSM.
Okay, thank you. And second question would be on the potential fall-away of the EEG levy and Germany, which could be already the case in 2022. What kind of effects do you expect for Covestro?
Yeah, it's currently really, I would say, a little bit challenging to say because the currently intended stop of the EEG and also the respective potential impact would mean that we would only see about one year later a visible impact. And if that would be cancelled, we would at least [indiscernible] (01:13:48) the positive impact about, let's say, 1.2 million tons of less accounted, if you want to say so, carbon dioxide equivalent emissions, simply due to the fact that we're currently falling under this and therefore we get the, if I may, so, dirty part of the German energy mix fully into our books.
Once that EEG exemption is falling away, we would also get the German complete energy mix in our books, and that would lead to, as I said, 1. 2 million tons positive development in terms of lowering our carbon dioxide emission footprint. Does that answer your question?
Yeah, yeah, absolutely. And my third question would be then on this, 230,000 tons of polycarbonate compounding capacities until 2025. Can you quantify how much CapEx would be needed for these kind of capacities? And also how fast is the capacity additions and also in what kind of regions.
Yeah, I think two things are very important. Number one is and same like carbon dioxide intensity, the capital intensity for those businesses is happily and, let's say, that's good that that is actually much lower than the intensity for the upstream businesses in terms of capital. So, normally, we would expect for 230KT, a CapEx in the low triple digit million number. And also the complexity to really install it is much lower than building, for example, a fully-fledged polycarbonate plant in that order of magnitude.
So, from that perspective, I would expect that those CapEx costs are much lower than you would expect for an upstream polycarbonate. I would also expect that we could swiftly execute and we will definitely also execute this where the key markets are and the key markets are for that growth to the largest extent in relative as well as absolute terms of growth in Asia-Pacific. However, I do not want to indicate something that we only invest in Asia Pacific or give you a share because it is way too early to talk about specific investments. But that is just a general order of magnitude to, to give you some indication. Asia Pacific is the market to be. We also see a good growth for those high value products in the United States, as well as in Europe.
And regarding the ramp-up pace, so basically this 230,000 tons, should we expect in a linear trend for a ramp up?
Yeah, difficult to say, because we really look into individual markets and there we go for local permits, we need to see where is the exact place where we do that, and we also did just finish one line in 2021 and the ramp-up currently is happening. That means specifying with customers, then fully loading the plants with all the flexibility that those plants have and so on and so forth. So, I would not expect a linear ramp up, but it's more like bits and pieces of smaller and larger lines, as we call it, for extrusion. I mean, that's the name of the technology how you do it. That compounding is basically extrusion process.
And therefore there might be a year 5,000 tons, then there might be 20,000 tons and there might be another 6,000 tons. So it's really a big network of smaller plants here and there at sites that are close to customers within an already existing site. And that is exactly why I cannot say it will be a linear topic. But once again, as a reminder, that is not additional capacity in terms of polycarbonate capacity. It's just that we take more of our own production of standard polycarbonate and route it through the additional capacity of highly specialized polycarbonate.
So, no additional overall capacity, we are just moving, let's say, from highly cyclical standard polycarbonates now to the value adding products in our portfolio to achieve, let's say, 80% of our portfolio by 2025 to be in that, let's say, space.
Okay. Thank you for this clarification and the answers.
Mr. Köhler, there are no further questions at this time. Please continue with any points you wish to raise.
Thank you all for your interesting question and for your interest in Covestro. I think we are already slightly overdue on time, so, happy to close it right now. If you have any additional questions, just come back to the IR team. Thanks. Bye.
Ladies and gentlemen, this concludes the Covestro earnings call. Thank you for participating. You may now disconnect.